UAW rejects GM, Chrysler proposal in loan talks

February 14, 2009

UAW rejects GM, Chrysler proposal in loan talks

By Justin Hyde
Free Press Washington Staff

WASHINGTON — The UAW is rejecting changes to a retiree health care trust proposed by General Motors Corp. and Chrysler LLC, saying the companies want to shortchange workers to benefit bondholders.

 

The union said today that the automakers wanted to reduce their contributions to the trust fund, increase its obligations and stretch out their remaining cash payments over 20 years.
 

The dispute, four days before the automakers must submit restructuring plans to the Obama administration, suggests the difficulties the companies face to win the concessions called for by the government.
 

The $17.4 billion rescue loans from the federal government to GM and Chrysler require the automakers to work out agreements with bondholders to swap two-thirds of the company’s debt for new stock.
 

Meanwhile, the UAW was required to consider accepting half the money due from GM and Chrysler for the retiree health care trust, known as a voluntary employee beneficiary association, in stock rather than cash or debt. The GM payment alone would total $10.2 billion in stock.
 

"The GM and Chrysler VEBA proposals contradict the terms of the Treasury loan agreements," Alan Reuther, the UAW’s legislative director, said today. "These VEBA proposals are a non-starter for the UAW."
 

Reuther said the companies’ proposals differed in four ways from what the loan agreements called for, namely offering the VEBA stock worth less than half of their obligation under the contract.
 

He said the companies want to convert half their payments to stock immediately, rather than when the payments are due. The remaining payments would be stretched out over 20 years.
 

And the automakers want the trust to pick up their retiree health care costs for this year.
 

GM spokesman Greg Martin said the company “continues to have discussions with all our stakeholders, including the UAW, and we intend to deliver a plan to Treasury by the deadline.”
 

Bondholders had complained in recent weeks that the union was getting a better deal for its health care obligations than they were being offered for their bonds, even though the two would have the same priority if either automaker filed for bankruptcy.
 

The UAW made the health care trusts a centerpiece of its 2007 contracts with GM, Chrysler and Ford Motor Co., saying they would relieve the automakers of paying for such costs while ensuring health care for 750,000 retirees and their family members.
 

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