GM UAW Health Care Agreement

GM and UAW Reach Tentative Agreement on Health Care  
                                         
    Agreement to Reduce Retiree Health-care Liability by About $15 Billion  
      Sale of Controlling Interest in GMAC to Strategic Partner Explored  
  GM Structural Cost Reduction Run Rate Target of $5 Billion by End of 2006  
  
    DETROIT, Oct. 17 -- General Motors Corp. and the United Auto Workers  
reached a tentative agreement early today to reduce GM's health-care  
costs significantly while maintaining high quality health-care benefits for  
its hourly employees and retirees in the United States.  
    The tentative agreement, subject to finalized language and UAW-GM member  
ratification, is projected to reduce GM's retiree health-care (OPEB)  
liabilities by about $15 billion, or 25 percent of the company's hourly  
health-care liability, and cut GM's annual employee health-care expense by  
about $3 billion on a pre-tax basis.  Cash savings are estimated to be about  
$1 billion a year.  
    The tentative agreement also includes contributions to a new independent  
Defined Contribution Voluntary Employee Benefit Association (VEBA) that will  
be used to mitigate the impact of reduced GM health-care coverage on  
individual hourly retirees.  The new independent VEBA will be partially funded  
by GM contributions of $1 billion in each of three years - currently expected  
to be 2006, 2007 and 2011.  Additional modest funding opportunities are under  
discussion, contingent on GM's improved financial performance.  
    Wagoner praised the UAW President Ron Gettelfinger and Vice President Dick  
Shoemaker for their leadership and hard work in coming to today's agreement.  
    'These negotiations were done in a positive, cooperative, problem-solving  
spirit,' Wagoner said in remarks to employees at GM's global headquarters in  
Detroit.  'While it may have taken some time to reach this cooperative  
solution, I think it was time well-spent.'  
    Specific details regarding modifications to the health-care plan will be  
shared with affected employees and retirees soon.  Wagoner said the modified  
plan will continue to provide high quality health care for GM's more than  
750,000 U.S. hourly employees and dependents, retirees and surviving spouses.  
    Additionally, GM and the UAW have agreed to continue to look at other  
options to further reduce health-care expenses and to improve other areas of  
competitiveness.  
    'GM and the UAW have renewed our joint commitment to work together on a  
broad scale to continue to reduce the cost and improve the quality of health  
care,' Wagoner said.  'We continue to be concerned that this issue is of great  
importance for the future of overall U.S. competitiveness.  We would welcome a  
more proactive role from elected officials at the national and state levels in  
broad-based strategies to address the U.S. health-care crisis.'  
  
    Other Cost Reductions  
    GM is committed to 100 percent or more capacity utilization of its plants  
by 2008, to further reduce structural costs.  This means the company will need  
to close additional assembly and component plants and reduce its manufacturing  
employment levels by 25,000 or more jobs.  This would come on top of the 1  
million-unit capacity reduction that has been achieved over the past three  
years.  
    'Over the past four months, we have done a lot of detailed work on this,  
and have at this point a reasonably clear line of sight on our overall  
manufacturing restructuring plan,' Wagoner said.  'Our next steps will be to  
work this plan in detail with the affected unions.  We are planning to  
announce further details on this manufacturing restructuring by the end of  
this year.  
    Wagoner noted that GM already has made significant progress in reducing  
structural costs, lowering salaried, executive and contract employee costs and  
improving productivity.  U.S. salaried employee headcount has been reduced 30  
percent in the past five years, and continued reductions are planned for 2006.  
    'We have accomplished this in an orderly way, without disruption to our  
ability to execute our key business strategies, and we are now at global  
competitive levels of salaried productivity, although we know we need to keep  
raising the bar.'  
    Recently, GM's salaried U.S. employees and retirees were informed of  
additional changes to their health-care benefits, including higher medical co- 
pays.  In addition, as announced earlier, there is no program for salary  
increases, no bonuses and no enhanced variable pay for 2005 for GM's salaried  
employees and executives.  
    Wagoner acknowledged that these difficult decisions will have an impact on  
many GM employees.  
    'We will do our best to minimize this impact on each of you and your  
families,' he told employees.  'We hope you will understand that, with these  
difficult actions, we will help to ensure a viable and growing GM for the  
future.'  
    With all the cost-reduction initiatives in place, GM expects to reduce its  
structural cost by a $5 billion run rate by the end of 2006.  The 2006 full- 
year impact depends on timing of approvals of the health-care changes.  
    'While this sounds like a large number, we recognize that it only goes  
part of the way we need to go to put GM North America in the fully competitive  
position that is necessary to maintain and enhance our future viability and  
growth.  This is a very big step that we will build on as we go forward.'  
    In addition, GM is targeting a $2 billion gross reduction in material  
costs in 2006, despite higher commodity prices and troubled supplier  
situations, yielding a net reduction of $1 billion after including the cost of  
significant product enhancements.    
    These estimates exclude any possible impact from Delphi's Chapter 11  
reorganization.  
    Two major opportunities to reduce material costs are optimizing GM's  
sourcing footprint with the most competitive supplier sources, and leveraging  
the globalization of GM's product development, Wagoner said.  
  
    GMAC   
    Wagoner also announced that GM is exploring the possible sale of a  
controlling interest in General Motors Acceptance Corp. (GMAC) to a strategic  
partner, with the goal of restoring GMAC's investment grade rating and  
renewing its access to low-cost financing.  
    In addition, GMAC said it will continue to evaluate strategic and  
structural alternatives to help ensure that its residential mortgage business,  
Residential Capital Corp., or ResCap, retains its investment grade credit  
ratings.  
  
    Impact Due to Delphi's Chapter 11 Proceedings  
    GM's tentative health-care agreement with the UAW provides former GM  
employees who became Delphi employees the potential to earn up to seven years  
of credited service for purposes of eligibility for certain health-care  
benefits under the GM/UAW Benefit Guarantee.  Due to the net effect of  
reductions in its health-care costs and this expanded eligibility for credited  
service, GM is revising its estimate of the range of its potential exposure to  
costs under the Benefit Guarantee from the previously reported $0 to $11  
billion range, to $0 to $12 billion.    
    Although GM management is unable to estimate an amount of loss, if any,  
that GM may sustain due to Delphi's Chapter 11 proceeding, and continues to  
evaluate whether, when and to what extent GM may need to record a related  
liability, it continues to believe that amounts closer to the midpoint of the  
range are considered more possible than amounts at either end of the range.  
      
    General Motors Corp. (NYSE: GM), the world's largest automaker, has been  
the global industry sales leader since 1931.  Founded in 1908, GM today  
employs about 317,000 people around the world.  It has manufacturing  
operations in 32 countries and its vehicles are sold in 200 countries.  In  
2004, GM sold nearly 9 million cars and trucks globally, up 4 percent and the  
second-highest total in the company's history.  GM's global headquarters are  
at the GM Renaissance Center in Detroit.  More information on GM can be found  
at http://www.gm.com .  
  
    Forward-looking Statements  
    In this press release and in related comments by General Motors  
management, our use of the words 'expect, anticipate, design, estimate,  
forecast, initiative, objective, plan, goal, project, outlook, priorities,  
targets, intend, evaluate, seek' and similar expressions is intended to  
identify forward looking statements.  While these statements represent our  
current judgment on what the future may hold, and we believe these judgments  
are reasonable, actual results may differ materially due to numerous important  
factors that are described in GM's most recent report on SEC Form 10-K, which  
may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8- 
K.  Such factors include, among others, the following: the ability of GM to  
complete a transaction with a strategic investor regarding a controlling  
interest in GMAC, while maintaining a significant stake in GMAC, securing  
separate credit ratings and low cost funding to sustain growth for GMAC and  
ResCap and maintaining the mutually beneficial relationship between GMAC and  
GM; changes in relations with unions and employees/retirees and the legal  
interpretations of the agreements with those unions with regard to  
employees/retirees; changes in economic conditions, currency exchange rates or  
political stability; shortages of and price increases for fuel, labor strikes  
or work stoppages; health-care costs; market acceptance of the corporation's  
new products; pace of product introductions; significant changes in the  
competitive environment; changes in laws, regulations and tax rates; and, the  
ability of the corporation to achieve reductions in cost and employment levels  
to realize production efficiencies and implement capital expenditures at  
levels and times planned by management.   
  
SOURCE  General Motors Corporation  
    -0-                             10/17/2005 P  
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