Automaker GM To Spend $3B in Q1 To Establish Fund for Future Retiree Health Costs

Officials for General Motors on Thursday announced that the company will report a first-quarter pretax charge of as much as $3 billion to establish a fund for future retiree health care costs, the Detroit Free Press reports. The fund is part of an October 2005 agreement with United Auto Workers that will require more than 475,000 union retirees and their dependents to pay part of their health insurance premiums for the first time (Detroit Free Press, 4/14). Under the agreement, GM will contribute $1 billion annually in 2006, 2007 and 2011 to the fund to help offset the cost impact (Kosdrosky/Hawkins, Wall Street Journal, 4/14). Over seven years, the agreement likely will decrease health care liability for GM by $15 billion and reduce health care costs for employees by $3 billion on a pretax basis (Dow Jones/New York Times, 4/14). The first-quarter charge will include the $1 billion contribution for 2006, and the Securities and Exchange Commission might require GM to include the $1 billion contributions for 2007 and 2011. GM spokesperson Toni Simonetti said that the company and SEC have begun discussions on the issue. David Healy, an analyst for Burnham Securities, said the amount of the first-quarter charge will not affect the cash position of GM, although a larger charge might affect public perception of the company (Wall Street Journal, 4/14).

Opinion Piece
"Health care costs are destroying our nation's economic edge," International Brotherhood of Teamsters President James Hoffa writes in a Detroit News opinion piece. The "cards are stacked against American companies as they try to compete with low-cost, low-wage foreign producers," and the "only real solution to this crisis is national health care," Hoffa writes. He writes that GM and other companies should "stop fighting" against unions and "start fighting alongside us," adding, "It's time for all Americans to join this fight for a country that rewards hard work and where working families don't have to choose between going to the doctor and paying the rent" (Hoffa, Detroit News, 4/14).