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October 17, 2005
GM and UAW Reach Tentative Deal on Health Care

General Motors Corp. says it has reached a tentative agreement with the United Auto Workers to reduce the company's healthcare costs significantly.

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The company estimates that the tentative agreement, subject to finalized language and UAW-GM member ratification, would reduce GM's retiree healthcare liabilities by about $15 billion, or 25 percent of the company's hourly worker healthcare liability, and cut GM's annual employee healthcare expense by about $3 billion on a pre-tax basis. The company estimates that cash savings would be about $1 billion a year.

The tentative agreement also includes contributions to a new independent Defined Contribution Voluntary Employee Benefit Association (VEBA) that the company says will be used to mitigate the impact of reduced GM healthcare 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.

The company says it will share details regarding modifications to the healthcare plan with affected employees and retirees soon.

Recently, the company informed its salaried U.S. employees and retirees of additional changes to their healthcare 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, according to the company.

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