GM Retirees to Get Health Coverage from VEBA

June 1, 2009 ( - General Motors auto workers have approved a restructuring plan that puts the workers in the same posture as Chrysler employees by getting their retiree health care from a union-run Voluntary Employee Benefit Association (VEBA).

A Time Magazine story said the General Motors deal gives the VEBA some promissory notes, plus a 17.5% stake in GM and warrants to purchase another 2.5%. Like Chrysler employees (see Chrysler VEBA Funded in Post-Bankruptcy Deal ), GM retirees will be relying on the VEBA for health care coverage.

GM’s VEBA had $14.4 billion in the middle of 2008, and now has $9.4 billion in assets that would barely last three years in the face of escalating health-care costs, according to Time.

On the other hand, Chrysler has only 78,000 retirees, compared with GM’s army of 377,000, but the financials don’t line up any better for its VEBA, which has $1.6 billion in cash.

According to the news story, GM and the union estimated in 2007 that it would require an investment of $57 billion to provide future health care for GM’s blue-collar retirees, even after trimming some benefits (see GM and UAW Agree to Retiree Health Care Trust ).