GM to see $13 billion savings from health-care dea

[Northstar]

Reuters / April 13, 2006 - 3:00 pm / UPDATED: 4/13/06 4:30 P.M.

DETROIT (Reuters) -- General Motors said on Thursday it expects to see net cost savings of about $13 billion over six years from its health-care deal with the United Auto Workers union.

GM, in a Securities and Exchange Commission filing, said it will begin accounting for its contributions to the Defined Contribution Voluntary Employees' Beneficiary Association, or DC VEBA, during the first quarter of 2006 and will take a $1 billion charge before taxes in the quarter.

GM said it will begin to realize a reduction in health-care expense in the third quarter.

Under the agreement struck between GM and the UAW last October, hourly retirees will have to pay monthly contributions, annual deductibles and co-insurance costs for the first time, amounting to $370 a year.

GM will also have to make a $3 billion donation to DC VEBA over the next six years.

GM said it is currently in discussions with the SEC regarding the accounting of its DC VEBA contributions and aims to resolve the issue before it files its quarterly report for the first quarter of 2006.

GM last October estimated the deal would reduce its health care liabilities for hourly employees by about $15 billion, or 25 percent, and reduce its annual employee health care expense by about $3 billion before taxes during a seven-year period.

The deal remains in effect until at least September 2011, after which either GM or the UAW may cancel upon 90 days written notice.

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I'd like to see them save about $3-4 billion per year, but at least this is a start.

[ellives]

Maybe Mr. Bush could help them out by passing a national health care program. Not like the farce that Medicare part D is, where it's just a handout to the drug companies but a REAL national health care plan.

Oh but that's right, it wouldn't be relevent.

Edited April 15, 2006 by ellives

[Petra]

This figure works out to an average of $2.17 Billion saved per year, or $54,250,000 per quarter. While that's certainly nothing to scoff at, it seems insignifigant when you consider that GM is losing 1 Billion or more every quarter. IMO, this is just a stopgap until such time as GM can force further concessions from the UAW.