Automakers Seek Financial Assistance; GM Proposal Includes Proposed Delay In Contributions To VEBA

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 04 Dec 2008 - 3:00 PDT

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Officials from the Big Three automakers on Tuesday presented to Congress individual proposals that included requests for as much as $34 billion in financial assistance to help prevent bankruptcy, as well as revisions to their obligations to a fund that will provide health benefits to United Auto Workers retirees, the AP/San Francisco Chronicle reports (Hirschfeld Davis, AP/San Francisco Chronicle, 12/3). Under contracts negotiated last year, the automakers agreed to contribute about $56.5 billion to the volunteer employees' beneficiary association, which UAW will manage. The VEBA, which will take effect in 2010 and remain operational for 80 years, will reduce retiree health benefit liabilities for the automakers by about $100 billion (Kaiser Daily Health Policy Report, 11/12).

In one proposal, General Motors asked Congress for $18 billion in loans and $6 billion in credit, as well as a delay in company obligations to the VEBA, among other measures (Snell, Detroit News, 12/3). GM has agreed to contribute $7.5 billion to the VEBA in early 2010 (Kaiser Daily Health Policy Report, 12/2).

Chrysler in a second proposal asked Congress for $7 billion in loans by the end of the year and $6 billion from a Department of Energy program designed to promote the development of fuel-efficient vehicles. Among other measures, the proposal included a plan to reduce Chrysler's contributions for health benefits for salaried employees (Hirschfeld Davis/Krisher, AP/Denver Post, 12/3).

In a third proposal, Ford asked for $9 billion in credit and $5 billion from the DOE program (Stoll et al., Wall Street Journal, 12/3).

According to the AP/Chronicle, congressional Democratic leaders "voiced concern and a desire to do something to avert an automaker collapse" but "made no commitments about helping" the firms (Hirschfeld Davis, AP/San Francisco Chronicle, 12/3). House Speaker Nancy Pelosi (D-Calif.) said, "I believe that an intervention will happen either legislatively or from the administration. I think it is pretty clear that bankruptcy is not an option" (Rogers, The Politico, 12/3).

American Public Media's "Marketplace Morning Report" on Wednesday reported on the proposals from the automakers. The segment includes comments from labor advocate Jonathan Tasini and former Department of Commerce Secretary Peter Peterson (Dimsdale, "Marketplace Morning Report," American Public Media, 12/3).

UAW Meeting
UAW officials have scheduled an emergency meeting for Wednesday to discuss the proposed revisions to the automakers' obligations to the VEBA, among other issues. UAW President Ron Gettelfinger said, "We have ongoing discussions with the companies about different issues. We're working all the time to help save the companies money" (Krisher, AP/San Francisco Chronicle, 12/3).

Opinion Piece
"The brutal truth about the plans being sent to Washington from Detroit is that all three companies are in a race that pits time against cash," and UAW "will need to choose its words" to members and "courses of action carefully" because "how it sounds to those living and working outside the Detroit bubble could be as key to the victory or defeat of the rescue loans as the automakers' plans themselves," columnist Daniel Howes writes in a Detroit News opinion piece.

He adds, union arguments that they've "'already given enough,' or that last year's contract established two-tier wages" and the VEBA do not "do any good when the companies aren't hiring, cash is evaporating and GM, for one, is seeking a delay in funding retiree health care" (Howes, Detroit News, 12/3).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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