DETROIT - General Motors has announced a deal with the United Auto Workers union to slash its multibillion-dollar health-care costs, sending its shares up as much as 13 per cent even as it posted a fourth straight quarterly loss.
The cash-strapped automaker said the pact would reduce its employee health-care
expenses by US$3 billion ($4.4 billion) annually before taxes.
"This is a huge move," said GM chairman and chief executive Rick Wagoner, who has been under pressure to stop the financial bleeding at the world's biggest automaker and pull its crucial North American operations back to profitability.
GM, which lost more than US$1.4 billion in the first half of the year, posted a third-quarter loss of US$1.6 billion, or US$2.89 a share.
Wagoner called the health-care deal, which analysts said could be replicated at Ford and the Chrysler arm of DaimlerChrysler, "the single biggest cost reduction" in GM history.
GM also said it was exploring the sale of a controlling interest in its profitable finance arm.
Pressure on GM is intense, with its main auto parts supplier in bankruptcy, imports cutting into its market share, sales of sport utility vehicles stalled, and raw material costs rising.
In North America, where the company faces its biggest challenges, GM has lost more than US$4.5 billion so far this year.
The tentative UAW agreement, which must be ratified by GM's unionised workers, is projected to reduce GM's retiree health-care liabilities by about US$15 billion and result in a 25 per cent cut in the company's hourly health-care liability, GM said.
- REUTERS
