GM Files For Bankruptcy, Union Health Plan Changes
The United Auto Workers' benefits plan is expected to receive a nearly 20 percent ownership stake in General Motors as a result of the automaker's bankruptcy filing today and proposed restructuring, the Washington Post reports (Whoriskey, 6/1).
The bankruptcy will cause drastic changes in UAW retirees health benefits, Time reports. The GM stock awarded to the VEBA, or Voluntary Employees Benefit Association, is near worthless, and the those who depend on the benefits are uneasy, UAW President Ron Gettelfinger told Time. GM's 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).
Agreements between GM, the White House and the union have resulted in restructured payment schedule for the benefit plans, Business Week reports. "The union agreed to take 17.5% equity in the new GM, stock warrants for an additional 2.5 % of the company, plus $2.5 billion in cash and $6.5 billion in preferred stock that pays a $585 million annual dividend-all in place of the $20 billion GM had pledged to the UAW to start a Voluntary Employee Benefits Assn., or VEBA" (Welch, 5/31).
Also, bondholders agreed Saturday to take up to a 25 percent stake in GM, clearing the last hurdle to GM's bankruptcy, the Washington Post reported over the weekend.
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).