Judge rebuffs GM retirees’ request for pay out

Rules that the restructured GM is not obligated to pay $450 million in

Once a bastion of post-retirement perks, in the past decade the auto industry and its golden-aged alumni have taken a fair share of lumps. In a decision on Dec. 10, a federal court ruled the reorganized General Motors no longer has an obligation to pay out health benefits it had promised to a subsidiary.

The suit came in 2010, when the group United Auto Workers (UAW) suited the just-then reorganized GM for $450 million payments to cover medical benefits for Delphi Corp.  The plaintiffs charged that a pact formed in 2007 was still viable. GM had agreed at that time that it would add money to the Voluntary Employee Benefits Association which would give healthcare to retired Dephi workers.

However, Judge Avern Cohn of the U.S. District Court in Detroit shot down the request, saying that GM’s obligations were voided when it went into bankruptcy and was reorganized with government assistance in 2009.

"New GM assumed only what was in that agreement; the $450 million payment was not among those obligations," Judge Cohn wrote in a 34-page opinion. "Whether New GM has a moral obligation regarding the payment is another matter and not relevant in the face of clear contractual language."

UAW President Bob King said in a statement following the ruling, "we are disappointed with the Court's decision in this case, which seeks to protect benefits for retirees who worked all their lives to help make GM and Delphi successful.”

Regardless of the moral ramifications the judge referenced, it’s unlikely that GM will hand over $450 million out of the goodness of its heart.

 

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Chris DiMarco

Chris DiMarco, Associate Editor of InsideCounsel magazine, has a background in multimedia production with previous involvement in projects in which he developed and created content...

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