In a statement , GM said it “will defer approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW (United Auto Workers) VEBA.” The agreement to set up the trust was reached last September in an effort to help GM with its credit ratings (See GM and UAW Agree to Retiree Health Care Trust ).
GM also said health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. In exchange, affected retirees and surviving spouses will receive a pension increase from GM’s over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage, according to the statement.
GM plans further salaried headcount reductions in the U.S. and Canada in the 2008 calendar year, which will be achieved through normal attrition, early retirements, mutual separation programs and other separation tools. there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009.
For executives, in addition to these changes, there will be no annual discretionary cash bonuses for the company’s executive group in 2008. The elimination of the annual cash bonus, combined with GM’s long-term incentives, will result in a significant reduction in cash compensation opportunity for 2008. GM said for the company’s top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84%.
The company expects the benefit changes, salaried headcount reductions, and other related savings to result in an estimated reduction in cash costs of more than 20%, or $1.5 billion in 2009.
Aside from the compensation and benefit reductions, GM’s attempt to raise $15 billion in liquidity by 2009 includes potential asset sales, additional cost cutting, and other financing measures.
“We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix,” said GM Chairman and CEO, Rick Wagoner, in the statement.