GM agrees union deal as losses soar
General Motors, the world’s biggest automaker yesterday said that it had agreed a deal with the United Auto workers union to slash its healthcare costs.
The announcement came as GM revealed widening losses for the third quarter of $1.6bn (£910m), or the equivalent of $2.89 per share. Chief executive of the embattled group, Rick Wagoner, said cash savings from the tentative agreement to reduce retiree health care liabilities by about 25 per cent and its annual employee health care expenses would save it up to $1bn a year.
The company also said that it would sell off a majority stake in its finance arm General Motors Acceptance Corp (GMAC) which has seen its investment grade credit rating slashed because of the parent company’s poor financial performance.
GM has been by hit by falling sales in America and stiff competition from abroad and has even seen its car parts subsidiary Delphi collapse in Chapter 11 bankruptcy. Executives in the company have agreed to take pay cuts until it re-emerges from statutory protection.
Standard & Poor’s kept GM on credit watch. S&P analyst Scott Sprinzen said: “The results are desperate.” He said that the deal with UAW goes only part way to dealing with the company’s enormous healthcare costs and still leaves it in a significantly worse position than its competitors. Shares still rose 7.3 per cent, which experts said was a response to the potentially lucrative disposal of GMAC.