General Motors Corp. will eliminate healthcare coverage for salaried retirees over age 65 starting next year and defer payments to an independent healthcare trust as part of a larger strategy to bolster liquidity by $15 billion through 2009.
We are responding aggressively to the challenges of todays U.S. auto market, Rick Wagoner, chairman and chief executive officer of GM, said in a written statement. The Detroit automaker will cut jobs and freeze pay to salaried workers, reduce executive pay and scale back truck production by 300,000 units over the next year, the company said.
Starting in January, GM will no longer pay healthcare costs for retirees over age 65 but will increase pensions to help offset costs of Medicare and supplemental coverage, the company said. GM will also defer about $1.7 billion in payments that had been scheduled to be made to a temporary asset account in 2008 and 2009 to set up a voluntary employee benefit association, or VEBA, with the United Auto Workers. In a deal with the UAW announced last September, GM said that it would move 70% of its estimated $55 billion in healthcare liability into the tax-exempt trust. -- by Rebecca Vesely