Reuters reported that in a presentation to analysts, the automaker said it will transfer funds from a trust established as part of a 2005 UAW deal to a new Voluntary Employees’ Beneficiary Association (VEBA) trust. The VEBA will take over $47 billion in health care obligations for 270,000 union-represented retirees (See UAW Members Ratify GM Contract Changing Retiree Health Care ).
According to GM’s figures, the deal will boost cash flow starting in 2010 and will represent $3.3 billion in savings by 2011, a year after the trust fund begins operations, the news report said.
GM also said it will be able to hire thousands of new factory workers at a total cost of $25.65 per hour compared to its existing $78.21 cost under the new UAW pact.
“I’d characterize the agreement as very fair for our employees and retirees, while at the same time significantly improving GM’s competitiveness and largely eliminating a major risk on our balance sheet,” GM Chief Executive Rick Wagoner told analysts Monday, according to Reuters.
In its presentation, GM said it would also count $3.8 billion in wage and cost-of-living increases that would have been applied to fund the separate trust under the 2005 deal on health care toward the new VEBA trust.
Reuters reported that would cut new funding for the trust to $31.9 billion. Also included is a $2.5 billion cash contribution, the $16 billion transfer from the existing trust and $4.37 billion in proceeds from the issuance of a convertible note, GM said.
The VEBA funding plans assumes the new UAW-run trust would achieve asset returns of 9% annually in the face of health care cost increases of some 5%, according to GM.