General Motors and United Auto Workers officials likely will not meet a Tuesday deadline for an agreement on payments to a health insurance trust fund for retired autoworkers, which is required for the automaker to continue receiving federal loans, the Detroit News reports (Snell et al., Detroit News, 2/17). GM must submit its plan by Tuesday to justify the $13.4 billion federal restructuring deal reached late last year under the Bush administration. The company already has received about $9.4 billion of the funding (Trowbridge et al., Detroit News, 2/15).

Under the terms of the deal, GM must reduce debt by two-thirds and get UAW to consider accepting half of the money the firm owes to a voluntary employee beneficiary association in the form of company stock, the Detroit Free Press reports (Higgins, Detroit Free Press, 2/17). By 2009, GM is required to pay $10 billion into the fund, which will provide health coverage for retired workers (Vlasic/Bunkley, New York Times, 2/17). In total GM owes about $20.4 billion to the VEBA (Washington Times, 2/15). The firm's long-term health care obligations are estimated to be $47 billion (New York Times, 2/17).

UAW negotiators said they walked out on talks Friday because GM made demands that were "detrimental to retirees and the ability to provide health care" (Washington Times, 2/15). UAW Legislative Director Alan Reuther said, "Given the current state of things, it's quite clear that there won't be any agreement" by Tuesday (Marr/Whoriskey, Washington Post, 2/14). Negotiations between GM and UAW resumed on Sunday (Detroit News, 2/15). GM spokesperson Tony Sapienza said, "We're committed to meeting the goal of providing a plan as required by terms of the restructuring plan" (Washington Times, 2/15). GM said its plan would be completed Tuesday at the earliest (New York Times, 2/17).

Continuing Negotiations
Failing to secure the concessions by Tuesday does not mean the automaker will not receive the loan, as long as it can show it is working toward these goals. While this deadline is a "preliminary step," automakers must show considerable progress toward becoming viable companies by March 31 or the Treasury Department could recall the loans, the News reports (Detroit News, 2/17).

Chrysler and Ford Motor also are seeking concessions from UAW that would allow them to make VEBA contributions in the form of stock, but "the focus of negotiations has been with GM, which has to address how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills," the Times reports. UAW is seeking to address VEBA payments from all three firms at the same time (New York Times, 2/17). According to UAW, GM and Chrysler have proposed plans that differed from what the loan agreements require. The firms want to reduce their contributions to the VEBA, increase obligations and make the remaining cash payments over 20 years, UAW said (Higgins, Detroit Free Press, 2/16).

President Obama on Monday designated Treasury Secretary Timothy Geithner and National Economic Council Chair Lawrence Summers to oversee a task force that will evaluate the automakers' plans. The group is not expected to begin review of the preliminary plans for at least 10 days, according to an Obama administration official. Obama expects the negotiations between the firms and UAW to continue through the Tuesday deadline without pausing to submit a plan, the official said (New York Times, 2/17).

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

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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