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GM: UAW Health Care Trust Could Mean More Cuts

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

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.

GM spokeswoman Julie Gibson said in the past week the company was able to secure more than $8 billion for the trust with two notes, lowering the likelihood of spending cuts.

''That is in there because it is a potential risk factor out there, but not because we have any imminent concerns,'' she 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, and it has said previously that federal authorities are investigating its financial reporting.

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.

GM also said it doesn't plan to introduce as many new products in 2008 and 2009 as it did in 2007, instead relying on variations of its newer cars and trucks to attract new customers.
Such a strategy ''may not attract the same degree of consumer attention or premium pricing,'' the company said.

Still, the company plans to spend up to $9 billion per year in the next few years to support products and develop new technologies such as vehicles powered by hydrogen fuel cells.
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