GM, UAW reach tentative health-care agreement

General Motors Corp. and the United Auto Workers (UAW) reached a tentative agreement early today to reduce GM's health-care costs.

The tentative agreement, subject to finalized language and UAW-BM member ratification, is projected to reduce the company's retiree health-care (OPEB) liabilities by about $15 billion, or 25 percent of the company's hourly health-care liability, and cut GM's annual employee health-care expenses by about $3 billion on a pre-tax basis. Cash savings are estimated to be about $1 billion a year.

The tentative agreement also includes contributions to a new independent Defined Contribution Voluntary Employee Benefit Association (VEBA) that will be used to mitigate the impact of reduced GM health-care coverage on individual hourly retirees. The new independent VEBA will be partially funded by GM contributions of $1 billion in each of three years — currently expected to be 2006, 2007 and 2011. Additional modest funding opportunities are under discussion, contingent on GM's improved financial performance.

Specific details regarding modifications to the health-care plan will be shared with affected employees and retirees soon. Wagoner said the modified plan will continue to provide high quality health care for GM's more than 750,000 U.S. hourly employees and dependents, retirees and surviving spouses.

More information can be found here.