Word: chrysler
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...Assuming the deals survive bankruptcy court - and experts expect it will - the change marks a new direction in health care for GM retirees, putting them in much the same camp as Chrysler retirees. Each group will now receive health-care benefits from two underfunded vehicles known as VEBAs (Voluntary Employee Benefit Association), which will have ownership stakes in the auto companies and representation on the corporate boards. Though the VEBA for each company was set up prior to bankruptcy, health-care administration largely remained with the automakers. Now it's all VEBA, all the time. (See "General Motors: 10 Milestones...
...sure, the VEBA financial responsibilities are daunting. As the automakers wind down their involvement with retiree health care, both GM and Chrysler have stopped revealing details of their related costs. However, GM vice chairman Robert Lutz recently noted that GM has spent more than $103 billion on health care in the past 15 years - one big reason the company is in its current predicament. (See TIME's photo-essay "Detroit's Beautiful, Horrible Decline...
...that number. It had $14.4 billion in the middle of 2008, and now has only $9.4 billion in assets, which is beyond the reach of creditors but would barely last three years in the face of escalating health-care costs. Gettelfinger describes the rest of the GM and Chrysler VEBA assets as "paper money," referring to the stock, warrants and notes from two virtually bankrupt companies. Not a lot of optimism there...
...Chrysler has only 78,000 retirees, compared with GM's army of 377,000, but the financials don't line up any better for its VEBA, which has only $1.6 billion in cash - a fact that is already raising anxiety inside the union. Chrysler is expected to get $6 billion in new federal aid as it steps out of bankruptcy court, but Chrysler/Fiat is obligated to steer just $381 million into the VEBA next year. One possible save: in a little-noted facet of the new labor contract with Fiat, the VEBA can sell its shares to the Italian automaker...
...Italian carmaker Fiat also remains a contender. Fiat CEO Sergio Marchionne has been jetting between the U.S. and Europe for weeks, meeting on both sides of the Atlantic with key politicians, unions and investors. Fiat recently acquired Chrysler and now wants to merge GM's European business into the Fiat-Chrysler group to create one of the biggest carmakers in the world. His plans to close plants in Germany and Italy have been roundly condemned by powerful German governors and the IG Metall trade union. A Chinese carmaker, Beijing Automotive Industry Corp., is expected to detail its own plan...