As if to confirm that GM’s benefit obligation situation could actually be worse than today’s GAO report lets on, Automotive News [sub] is reporting that the UAW has sued GM over $450m in unfunded healthcare obligations for Delphi retirees. GM promised to fund a $450m Voluntary Employee Benefit Association for Delphi retirees in 2007, and Delphi’s bankruptcy court confirmed the commitment in last October. But, according to the UAW suit:
the UAW made a written demand that the company honor its contractual obligation to make the foregoing payment [last October… but] that UAW demand was rejected and since that time the company has failed and refused to make the contractually required payment.
That obligation apparently was not voided by GM’s bankruptcy, although The General’s spokesfolks have yet to officially comment on the UAW’s suit.
One thing is for certain though: this news clearly aggravates GM’s benefit cash crunch at a time when it is still barely able to cover its “cost of sales” with sales revenue and is still bleeding cash.According to the GAO report, GM’s payment schedule to meet minimum pension obligations looks something like this:
Adding another nearly half-billion dollars in Delphi VEBA costs doesn’t make a huge difference in light of these giant looming obligations, but it’s just one more cash suck that will weaken GM at a time when it needs to conserve cash on hand for these future outlays. Not to mention the necessary investments in new products, rescues of struggling overseas divisions in Germany and Korea, and maintaining the incentives that have been necessary to achieve current volume levels. To use the parlance of our elected leaders, a billion here, a billion there, soon you’re talking about real money.