GM: Cost of health-care trust could affect spending

GM: Cost of health-care trust could affect spending

GM is paying $33.7 billion into a health-care fund.

DETROIT (AP) — Setting up a huge health-care trust for hourly retirees could force General Motors Corp. to cut or delay spending in other areas, the automaker said in its annual report filed Thursday.

GM said it will have to pay up to $33.7 billion into the fund, including $25 billion in a relatively short period. If it can’t get financing on the right terms, it will affect the company’s spending in other unspecified areas, according to the report filed with the U.S. Securities and Exchange Commission.

The trust, called a voluntary employees beneficiary association, would let GM move about $46.7 billion in retiree health-care costs off its books, making it more cost-competitive with Asian automakers. It is the key feature of a new four-year contract signed last year with the United Auto Workers.

But GM, in its filing, had some doubts that it would be able to get funding needed for the trust on the right terms.

“If we are unable to obtain funding on terms that are consistent with our business plans, we may have to delay or reduce other planned expenditures,” the company said.

Also in the report, GM said its internal controls over financial reporting still were not effective at the end of 2007. The company had the same concerns in its annual report last year.

GM also said it may have to sink more money into parts maker Delphi Corp. so its former subsidiary can leave bankruptcy protection. Delphi, which was spun off as a separate company in 1999, is having trouble getting financing to exit Chapter 11 due to tight credit markets.

And GM may have to invest more in GMAC LLC, the automaker’s former finance arm. In 2006, GM sold 51 percent of the business to an investment group led by Cerberus Capital Management LP for $14 billion.

Last year GMAC lost $2.33 billion as the housing slump and disruptions in the credit and capital markets battered its home mortgage division.

If economic conditions don’t improve, GMAC may ask GM to kick in money “during this period of stress,” the annual report said.

“While we do not have any legal obligation to provide additional capital to GMAC, we may determine that such an investment is necessary or advisable to maintain the value of our current interest in GMAC,” GM said in the report.

Meanwhile, GM said it has temporarily shut down a Michigan pickup truck plant because of a strike at a parts supplier.

GM spokesman Tom Wickham said the assembly center in Pontiac stopped making trucks when the first shift ended Thursday afternoon. He would not speculate on when the factory might reopen.

The plant employs about 2,500 hourly and salaried workers who make the Chevrolet Silverado and GMC Sierra pickup trucks. Other plants that make the trucks are still open.

The trucks have axles made by American Axle and Manufacturing Holdings Inc. The United Auto Workers went on strike against the parts maker Tuesday in a contract dispute.

No negotiations are scheduled.