Big 3, UAW Ask for Health Trust Help

The following article is from DetNews.com.

Cash-crunched automakers state need for payment help in their bid for federal financing.

By David Shepardson / Detroit News Washington Bureau

WASHINGTON — Detroit’s Big Three and the United Auto Workers are pressing the case for low-cost government loans to help automakers make required payments to trust funds to oversee hourly retiree health care starting in 2010.

The need for congressional support for the health care funding isn’t their most immediate concern, but it’s looming. The automakers are asking Congress for as much as $25 billion in “bridge financing” to help with their liquidity crisis, but that money also could be used for funding the health care trust.

Congress could consider that request, which is separate from the $25 billion already approved for low-cost loans for retooling plants to build more fuel-efficient cars, when it returns to work this month.

The topic of the health-care payments was addressed during an hour-long meeting of House Democrats convened by House Speaker Nancy Pelosi on Monday.

In total, Detroit’s Big Three automakers will make nearly $60 billion in payments to bankroll three trust funds to pay for hourly retiree health care.

In July, General Motors Corp. announced it had won permission from the UAW to push back $1.7 billion in payments owed in 2008 and 2009 to its Voluntary Employee Beneficiary Association fund that will cover health care for UAW retirees. GM will make the payments in 2010, when the UAW assumes responsibility for the fund.

That means GM will pay the $1.7 billion, plus accrued interest of 9 percent adding to the $5.3 billion already scheduled for 2010. They will be the first payments as part of a deal to give the UAW about $34 billion in cash and stock to assume $51 billion in GM’s retiree health care liabilities.

The shift to a VEBA to pay for retiree health care is the largest part of the 2007 labor contract that will reduce GM’s annual costs by $3 billion starting in 2010.

But GM faces a liquidity crisis now that analysts say may require outside help for it to survive beyond 2009, or to be able to make the payments to the trust fund.

Chrysler is to make payments totaling $9.8 billion into the fund, including $6.6 billion in 2010. A merged GM-Chrysler could face a staggering bill. Chrysler will also issue a note to the UAW worth $1.2 billion that’s due in 2016.

Ford is to pay between $13.2 billion to $15 billion into its retiree health care trust, based on the company’s future stock value. Ford took a $4.5 billion cash charge toward its retiree health care funding requirements this year, according to its second quarter filing.

UAW legislative director Alan Reuther said the financial ability of automakers to make the payments into the trust fund in 2010 is a concern, and one of the issues that should be addressed by Congress.

“If the federal government does not provide assistance to the Detroit-based auto companies to enable them to survive the economic downturn, hundreds of thousands of jobs at the auto companies and suppliers will be threatened,” UAW President Ron Gettelfinger wrote in an Oct. 27 letter to lawmakers. “The health care and pension benefits for the retirees and their families will be placed in jeopardy.” He noted that the government could be forced to assume a large increase in health care and retiree costs if the Big Three collapsed.

Detroit’s Big Three automakers spent $8.9 billion on health care in 2007, compared with a record $11 billion in 2005.

Automakers have said they think Congress should consider all available options to assist automakers.

About 1 million retirees and spouses receive health care and pensions from Detroit’s Big Three automakers, typically getting less than $20,000 per year.

Harley Shaiken, a professor specializing in labor studies at the University of California-Berkeley, said automakers need help with the impending costs.

“Without assistance, this is going to be a serious problem for automakers,” Shaiken said.