GM Sheds Billions In Costs Today

[nsap]

GM Sheds Billions In Costs Today
The UAW's VEBA Trust now has the health care cost burden.
www.gminsidenews.com
January 1, 2010
By: Nick Saporito

Starting today, January 1, 2010, General Motors will be freed of billions in health care liabilities. Last May, as part of GM’s efforts to restructure out of court, they and the United Auto Workers union agreed to an amended version of the 2007 contract. Included in those revisions were for the union to take over nearly all of members’ health care costs.

Prior to today GM was liable for nearly $2 billion per quarter in health care costs related to both active and retired UAW members. Starting today the UAW’s Voluntary Employee Beneficiary Association (VEBA) Trust will take over responsibility for those costs. As part of the contract, yesterday GM transferred a $10 Billion payment to the VEBA Trust from their pension fund. Additional funding for the VEBA Trust will come from the UAW’s equity stake in New GM when the VEBA Board wishes to sell their stake and annual payments to the fund by GM, and eventually Chrysler and Ford. Additionally, next week GM will issue $9 Billion in preferred stock to the VEBA fund with a 7% dividend. Below are the planned payments into the VEBA fund by GM:

• 2011-NONE
• 2012-$2.6 billion
• 2013-$3.4 billion
• 2014-$400 million
• 2015-$400 million
• 2016-$400 million
• 2017-$3.4 billion
• 2018-$400 million
• 2019-$3.4 billion

VEBA has existed since 2007, when it took on select health care liabilities from the Detroit-based automakers, however starting today the current VEBA is going to merge with New VEBA. The existing VEBA was slatted to have about $500 Million in the fund prior to GM’s $10 Billion payment yesterday.

GMI sources have stated that GM’s North American operations could be running at a profitable level now that VEBA is in full effect. The health care cost reductions shed over $2,000 in fixed costs per vehicle that GM builds in the United States.

Today’s health care cost reductions come in addition to just over $30 Billion in non-cash liabilities and nearly $27 Billion in debt that GM was freed of in it’s June 2009 bankruptcy filing.

[Clocker]

They will have to hire more people to count the money they will be rolling in now!! ;-)

[Buick61]

I can't wait to see next quarter's financial results.

A profit is desperately needed. Ford's profits are heralded. If GM becomes profitable, the naysayers will have less nay to say.

[FenwickHockey65]

A step towards profitability.

[RamJet502]

Amen!

[87silver]

American corporations sorely need a victory to show the world our resilience. Here's to GM's future success!

[osv_alero]

Originally Posted by Clocker

They will have to hire more people to count the money they will be rolling in now!! ;-)

Sounds good, though I hope that means more money for R&D, another words more great products.

[ohmywrd8]

Originally Posted by 87silver

American corporations sorely need a victory to show the world our resilience. Here's to GM's future success!

There are many American corporations that do. Apple, GE, and many others. But when it comes to the car industry, we sorely need one.

[Stéphane Dumas]

Originally Posted by Buick61

I can't wait to see next quarter's financial results.

A profit is desperately needed. Ford's profits are heralded. If GM becomes profitable, the naysayers will have less nay to say.

+1 and don't forget Chrysler, who's in a situation similar to GM.

[TurboSS]

Excellent, maybe GM can invest that money saved in a ULS for Cadillac as well as a CLS/6 competitor, further refine the Escalade (and distance it from Denali and other GMT900's), and come out with a next generation CTS sooner than anticipated

I'm looking forward to and saving up for a GM IPO.

[smithb]

Hopefully this means better interior materials and mechanicals. I know they put cheaper materials in the Camaro to save money for the 3.6. Maybe they won't have to make these compromises as much now.

[JBsZ06]

Many forget but it was Rick Wagners vision that made this possible.

The world financial crisis timing was off by a year but Rick was right on the money to make a GM profitable through implementing Veba..

thanks Rick for your forethought for a solution to a problem you did not create.

Thanks for the heads up.

[megeebee]

I'd forgotten this was coming. Do Ford and CHrysler have similar agreements with the UAW?

.

[megeebee]

Originally Posted by JBsZ06

Many forget but it was Rick Wagners vision that made this possible.

The world financial crisis timing was off by a year but Rick was right on the money to make a GM profitable through implementing Veba..

thanks Rick for your forethought for a solution to a problem you did not create.

Thanks for the heads up.

And thank you for this head's up. All worth remembering.

[nsap]

Originally Posted by JBsZ06

Many forget but it was Rick Wagners vision that made this possible.

The world financial crisis timing was off by a year but Rick was right on the money to make a GM profitable through implementing Veba..

thanks Rick for your forethought for a solution to a problem you did not create.

Thanks for the heads up.

You are correct. By all accounts Rick is responsible for the landmark 2007 UAW contract. Fritz and the Auto Task Force are only responsible for reducing the amount of cash payments GM has to make into it.