New trust will reduce company’s health-care liabilities by $3 billion: GM
The union representing workers at General Motors Canada has finalized its independent trust fund that will cover the costs of supplementary health-care benefits for retirees.
The “Auto Sector Retiree Health Care Trust” was negotiated between the Canadian Auto Workers Union and General Motors as part of the government-supported restructuring of the motor vehicle manufacturing company in spring 2009.
"This represents the final step in the restructuring of GM Canada, and now we can move forward with focusing on ensuring GM's future success and presence in Canada," says CAW president Ken Lewenza.
“The new health-care trust is another step forward as we work to de-risk and strengthen our balance sheet and position the company for sustainable profitability,” says GM senior vice president and chief financial officer Dan Ammann.
Following two years of legal implementation and consultation with GM retirees, the trust has now been approved by the Ontario Court of Justice and became effective Oct. 31, 2011. This system has already been in place providing supplementary health-care benefits for retired workers at Chrysler Canada since the beginning of 2011. The terms of the GM program took longer to implement due to economic issues and the fact that GM has more retirees.
Supplementary health benefits, which include prescription drug coverage, dental and vision care, will now be provided to the estimated 32,000 Canadian retirees of GM by the independent trust fund, instead of by the company. GM Canada will pay a total of over $2.5 billion into the fund over the next seven years, beginning with an initial contribution of $1 billion.
The funds contributed by GM, plus investment income earned on those assets, will be used to fund retiree health benefits, including benefits for existing workers at GM, after they retire.
Over the final two years of bargaining, the independent retirees' committee was able to negotiate additional funding commitments by GM, equal to $260 million, above the funding initially committed by the company in 2009.
The trust will be managed by an independent board of trustees.
