GM sheds billions from today......
Discussion
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.
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.
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.
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.
They've still got a lot of work to do, but if you look at the far reaching (and probably very long overdue) changes GM has been making over the past 18 months it does feel like they'll be a more credible contender. One of the benefits of a crisis like this (looking for the silver lining here...) is it does kick people hard enough to start making some of the difficult sort outs.
Hopefully a far more meaner and leaner GM as a result!
(still not great if you're one of the people affected by job cuts/loss)
Hopefully a far more meaner and leaner GM as a result!
(still not great if you're one of the people affected by job cuts/loss)
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