GM Readies Bankruptcy, Gets Bondholders To Agree To Debt Exchange Similar To Those Made By UAW With Health Plan
The approval of a deal to give the health care plan for the United Auto Workers an up to 20 percent ownership stake in GM means its retirees will continue to see drastic changes to their health care as the car maker readies its bankruptcy, Time reports.
Add the worry that the GM stock the VEBA is getting is near worthless and the changes are making many uneasy, UAW President Ron Gettelfinger told Time.
"To be sure, the VEBA financial responsibilities are daunting. As the automakers wind down their involvement with retiree health care, both GM and Chrysler have stopped revealing details of their related costs. However, GM vice chairman Robert Lutz recently noted that GM has spent more than $103 billion on health care in the last 15 years - one big reason the company is in its current predicament."
The VEBA has $9.4 billion in assets, only enough for three years of the 377,000 retirees' benefits. "In less than four years, blue-collar retirees have gone from modest co-pay and deductibles to footing 25 percent of the their bill for health. The new UAW contracts also include reductions in benefits: dental and vision coverage will be dropped, effective July 1" (Szczesny, 5/31).
In the meantime, bondholders agreed Saturday to taking up to a 25 percent stake in GM, clearing the last hurdle in allowing GM to file bankruptcy, The Washington Post reports.
But as they do so, some bondholders are upset that they've been given less guarantee on their investment than the UAW's VEBA: "The 'Main Street Bondholders,' representing some of those individuals, said the deal unfairly gave the United Auto Workers' retiree health-care trust fund 66 cents on the dollar, while offering bondholders 13 cents on the dollar, assuming the new GM is worth $25 billion. This group of bondholders vowed to fight back using a section of the bankruptcy code, which could give them their own standing" (Marr, 5/31).