GM UAW Health Care Agreement
GM and UAW Reach Tentative Agreement on Health Care
Agreement to Reduce Retiree Health-care Liability by About $15 Billion
Sale of Controlling Interest in GMAC to Strategic Partner Explored
GM Structural Cost Reduction Run Rate Target of $5 Billion by End of 2006
DETROIT, Oct. 17 -- General Motors Corp. and the United Auto Workers
reached a tentative agreement early today to reduce GM's health-care
costs significantly while maintaining high quality health-care benefits for
its hourly employees and retirees in the United States.
The tentative agreement, subject to finalized language and UAW-GM member
ratification, is projected to reduce GM's retiree health-care (OPEB)
liabilities by about $15 billion, or 25 percent of the company's hourly
health-care liability, and cut GM's annual employee health-care expense by
about $3 billion on a pre-tax basis. Cash savings are estimated to be about
$1 billion a year.
The tentative agreement also includes contributions to a new independent
Defined Contribution Voluntary Employee Benefit Association (VEBA) that will
be used to mitigate the impact of reduced GM health-care coverage on
individual hourly retirees. The new independent VEBA will be partially funded
by GM contributions of $1 billion in each of three years - currently expected
to be 2006, 2007 and 2011. Additional modest funding opportunities are under
discussion, contingent on GM's improved financial performance.
Wagoner praised the UAW President Ron Gettelfinger and Vice President Dick
Shoemaker for their leadership and hard work in coming to today's agreement.
'These negotiations were done in a positive, cooperative, problem-solving
spirit,' Wagoner said in remarks to employees at GM's global headquarters in
Detroit. 'While it may have taken some time to reach this cooperative
solution, I think it was time well-spent.'
Specific details regarding modifications to the health-care plan will be
shared with affected employees and retirees soon. Wagoner said the modified
plan will continue to provide high quality health care for GM's more than
750,000 U.S. hourly employees and dependents, retirees and surviving spouses.
Additionally, GM and the UAW have agreed to continue to look at other
options to further reduce health-care expenses and to improve other areas of
competitiveness.
'GM and the UAW have renewed our joint commitment to work together on a
broad scale to continue to reduce the cost and improve the quality of health
care,' Wagoner said. 'We continue to be concerned that this issue is of great
importance for the future of overall U.S. competitiveness. We would welcome a
more proactive role from elected officials at the national and state levels in
broad-based strategies to address the U.S. health-care crisis.'
Other Cost Reductions
GM is committed to 100 percent or more capacity utilization of its plants
by 2008, to further reduce structural costs. This means the company will need
to close additional assembly and component plants and reduce its manufacturing
employment levels by 25,000 or more jobs. This would come on top of the 1
million-unit capacity reduction that has been achieved over the past three
years.
'Over the past four months, we have done a lot of detailed work on this,
and have at this point a reasonably clear line of sight on our overall
manufacturing restructuring plan,' Wagoner said. 'Our next steps will be to
work this plan in detail with the affected unions. We are planning to
announce further details on this manufacturing restructuring by the end of
this year.
Wagoner noted that GM already has made significant progress in reducing
structural costs, lowering salaried, executive and contract employee costs and
improving productivity. U.S. salaried employee headcount has been reduced 30
percent in the past five years, and continued reductions are planned for 2006.
'We have accomplished this in an orderly way, without disruption to our
ability to execute our key business strategies, and we are now at global
competitive levels of salaried productivity, although we know we need to keep
raising the bar.'
Recently, GM's salaried U.S. employees and retirees were informed of
additional changes to their health-care benefits, including higher medical co-
pays. In addition, as announced earlier, there is no program for salary
increases, no bonuses and no enhanced variable pay for 2005 for GM's salaried
employees and executives.
Wagoner acknowledged that these difficult decisions will have an impact on
many GM employees.
'We will do our best to minimize this impact on each of you and your
families,' he told employees. 'We hope you will understand that, with these
difficult actions, we will help to ensure a viable and growing GM for the
future.'
With all the cost-reduction initiatives in place, GM expects to reduce its
structural cost by a $5 billion run rate by the end of 2006. The 2006 full-
year impact depends on timing of approvals of the health-care changes.
'While this sounds like a large number, we recognize that it only goes
part of the way we need to go to put GM North America in the fully competitive
position that is necessary to maintain and enhance our future viability and
growth. This is a very big step that we will build on as we go forward.'
In addition, GM is targeting a $2 billion gross reduction in material
costs in 2006, despite higher commodity prices and troubled supplier
situations, yielding a net reduction of $1 billion after including the cost of
significant product enhancements.
These estimates exclude any possible impact from Delphi's Chapter 11
reorganization.
Two major opportunities to reduce material costs are optimizing GM's
sourcing footprint with the most competitive supplier sources, and leveraging
the globalization of GM's product development, Wagoner said.
GMAC
Wagoner also announced that GM is exploring the possible sale of a
controlling interest in General Motors Acceptance Corp. (GMAC) to a strategic
partner, with the goal of restoring GMAC's investment grade rating and
renewing its access to low-cost financing.
In addition, GMAC said it will continue to evaluate strategic and
structural alternatives to help ensure that its residential mortgage business,
Residential Capital Corp., or ResCap, retains its investment grade credit
ratings.
Impact Due to Delphi's Chapter 11 Proceedings
GM's tentative health-care agreement with the UAW provides former GM
employees who became Delphi employees the potential to earn up to seven years
of credited service for purposes of eligibility for certain health-care
benefits under the GM/UAW Benefit Guarantee. Due to the net effect of
reductions in its health-care costs and this expanded eligibility for credited
service, GM is revising its estimate of the range of its potential exposure to
costs under the Benefit Guarantee from the previously reported $0 to $11
billion range, to $0 to $12 billion.
Although GM management is unable to estimate an amount of loss, if any,
that GM may sustain due to Delphi's Chapter 11 proceeding, and continues to
evaluate whether, when and to what extent GM may need to record a related
liability, it continues to believe that amounts closer to the midpoint of the
range are considered more possible than amounts at either end of the range.
General Motors Corp. (NYSE: GM), the world's largest automaker, has been
the global industry sales leader since 1931. Founded in 1908, GM today
employs about 317,000 people around the world. It has manufacturing
operations in 32 countries and its vehicles are sold in 200 countries. In
2004, GM sold nearly 9 million cars and trucks globally, up 4 percent and the
second-highest total in the company's history. GM's global headquarters are
at the GM Renaissance Center in Detroit. More information on GM can be found
at http://www.gm.com .
Forward-looking Statements
In this press release and in related comments by General Motors
management, our use of the words 'expect, anticipate, design, estimate,
forecast, initiative, objective, plan, goal, project, outlook, priorities,
targets, intend, evaluate, seek' and similar expressions is intended to
identify forward looking statements. While these statements represent our
current judgment on what the future may hold, and we believe these judgments
are reasonable, actual results may differ materially due to numerous important
factors that are described in GM's most recent report on SEC Form 10-K, which
may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-
K. Such factors include, among others, the following: the ability of GM to
complete a transaction with a strategic investor regarding a controlling
interest in GMAC, while maintaining a significant stake in GMAC, securing
separate credit ratings and low cost funding to sustain growth for GMAC and
ResCap and maintaining the mutually beneficial relationship between GMAC and
GM; changes in relations with unions and employees/retirees and the legal
interpretations of the agreements with those unions with regard to
employees/retirees; changes in economic conditions, currency exchange rates or
political stability; shortages of and price increases for fuel, labor strikes
or work stoppages; health-care costs; market acceptance of the corporation's
new products; pace of product introductions; significant changes in the
competitive environment; changes in laws, regulations and tax rates; and, the
ability of the corporation to achieve reductions in cost and employment levels
to realize production efficiencies and implement capital expenditures at
levels and times planned by management.
SOURCE General Motors Corporation
-0- 10/17/2005 P
/NOTE TO EDITORS: For additional media information visit
http://media.gm.com ./
/CONTACT: Tom Kowaleski, Vice President, GM Communications,
+1-313-667-3437 (office), +1-313-522-6644 (mobile), thomas.kowaleski@gm.com ,
or Brian Akre, GM Corporate Communications, +1-313-665-3159 (office),
+1-313-378-8697 (mobile), brian.akre@gm.com /
/Web site: http://media.gm.com
http://www.gm.com /
Latest directors dealings
- 1 minute ago Imperial Brands
- 3 minutes ago Unilever
- 22 minutes ago Morgan Sindall Group
- 32 minutes ago Taylor Wimpey
- 34 minutes ago HSBC Holdings