George S. May Business Blog

GM, UAW reportedly close to settling on a deal for health care obligations

Word is that General Motors Inc. and the UAW have agreed to a deal that will help reduce the $20 billion worth of retiree health-care obligations that have taken such a heavy toll on the industry.  Automakers used to offer high-end, life long benefits to its workers and as a result they have been hard-pressed to be able to follow though on those arrangements. In 2007 GM and the UAW created a special fund that let the company move billions of dollars worth of retiree health benefits from its balance sheet, but ever since the company has struggled to meet the scheduled payments. The Wall Street Journal reported that GM hopes to reach a deal with the UAW where they will pay around half of its obligation and then give the union a large equity stake in the company. What is promising, from GM’s standpoint, is that Ford and Chrysler were both allowed to cut similar deals earlier this year, in which they used stock to pay off their dues. Either way, don’t count you chickens until the UAW formerly agrees to the deal.

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