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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 10, 2007
GENERAL MOTORS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE
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38-0572515 |
(State or other jurisdiction of
incorporation)
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(I.R.S. Employer
Identification No.) |
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300 Renaissance Center, Detroit, Michigan
(Address of Principal Executive Offices)
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48265-3000
(Zip Code) |
(313) 556-5000
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17-CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
ITEM 1.01 Entry into a Material Definitive Agreement
On September 26, 2007 General Motors Corporation (GM) and the International Union, United
Automobile, Aerospace and Agricultural Workers of America (the UAW) entered into a Memorandum of
UnderstandingPost-Retirement Medical Care (the MOU) that was negotiated in conjunction with the
negotiation by GM and the UAW of a new national collective bargaining agreement governing the
wages, hours and terms and conditions of employment for UAW-represented employees (the National
Agreement). On October 10, 2007, the UAW announced that the MOU and the National Agreement had
been ratified by the membership of the UAW employees at GM. Final effectiveness of the MOU is
subject to a number of conditions as described below, but GM will begin executing certain
provisions of the MOU promptly pursuant to its terms. A copy of the MOU is attached to this Form
8-K as Exhibit 10.1, and the following description of the MOU is qualified in its entirety by
reference to the MOU.
The MOU is subject to class certification and court approval. Therefore, the parties intend to
negotiate and enter into a detailed settlement agreement and other related agreements (the Final
Settlement Documentation) to effect the transactions contemplated by the MOU, which will then be
submitted to the United States District Court for the Eastern District of Michigan for approval.
The Final Settlement Documentation will also require negotiation with and the approval of counsel
retained by the named plaintiffs in the class action case filed against GM on September 26, 2007 by
the UAW and putative class representatives of GM-UAW retirees (International Union, UAW, et al.
v. General Motors Corporation, Case: 2:07-cv-14074 (E.D. Mich.)). Certain other provisions of
the MOU will be carried out after the date the District Court issues an order approving the MOU and
the Final Settlement Documentation (the Initial Effective Date), and all provisions of the MOU
will be effective on the later of the date when all appeals from the District Courts order have
been exhausted (the Final Effective Date) or January 1, 2010 (the Implementation Date).
New Retiree Health Care Plan
The MOU provides that as of the Implementation Date, GM will transfer its obligations for providing
UAW retirees in the Covered Group with post-retirement medical benefits, including but not
limited to hospital, surgical, medical, prescription, drug, vision,
and, as applicable to a limited group of retirees, dental coverage, as well as
the cost of administering such benefits and $76.20 of the Medicare Part B premium (the
Post-Retirement Medical Benefits) to a new retiree health care plan (the New Plan) to be
established and maintained by either an independent committee or a joint labor-management committee
and to be funded by a newly established Voluntary Employee Beneficiary Association trust (the New
VEBA). The Covered Group is comprised of (a) all members of the class defined in the settlement
agreement approved in the class action case of International Union, UAW, et al. v. General
Motors Corp., Case No. 06-1475/2064 (the 2006 Settlement Agreement); (b) all future retirees
as such term is defined in the 2006 Settlement Agreement; (c) all currently active UAW-represented
employees of GM with seniority as of September 14, 2007 who retire with eligibility for
post-retirement medical coverage; (d) all UAW retirees from Delphi Corporation (Delphi) as of
September 14, 2007 who are entitled to GM retiree medical coverage under a previous agreement
negotiated among the UAW, GM, and Delphi (the Delphi MOU); (e) upon their retirement, all active
UAW-represented employees of Delphi or a former Delphi unit who are eligible for GM retiree medical
coverage under the Delphi MOU; (f) all UAW retirees from any other closed or divested GM-UAW
business units as of September 26, 2007 to the extent GM is responsible for their retiree medical
coverage; and (g) upon retirement after September 26, 2007, all active UAW-represented employees of
any other closed or divested GM-UAW business if GM would have responsibility for their retiree
medical coverage. The Covered Group also includes the spouses, surviving spouses, and dependents
of such current or former GM-UAW employees who are eligible for GM-provided retiree medical
coverage.
Prior to the Implementation Date, GM will continue to provide Post-Retirement Medical Benefits to
UAW retirees and their eligible spouses, surviving spouses and dependents on the basis set forth in
the 2006 Settlement Agreement. The New Plan and the New VEBA, when approved and implemented, will
supersede the terms set forth in the 2006 Settlement Agreement, and assume responsibility as of
the Implementation Date for all Post-Retirement Medical Benefits for the Covered Group for which GM
was previously responsible.
New VEBA Trust
The New VEBA will be established effective on the Implementation Date under the MOU and the Final
Settlement Documentation. The New VEBA will be qualified under Section 501(c)(9) of the Internal
Revenue Code, as amended, and comply as applicable with the Labor-Management Relations Act of 1947
(the LMRA). Funding for the New VEBA will begin within 10 days after the Final Effective Date,
and will come from a number of sources:
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Existing Internal VEBA. On January 1, 2008, GM will allocate a
percentage of the General Motors Welfare Benefit Trust (the Internal VEBA) that is
equal to the percentage of GMs OPEB liability attributable to UAW-associated employees
and retirees and their eligible dependents to a separate account (the UAW Related
Account), which will also hold the proportional investment returns on that percentage
of the trust. Effective January 1, 2008 and subject to the termination of the MOU, GM
will not disburse any assets from the UAW Related Account until the Final Effective
Date. GM will then transfer the assets in the UAW Related Account or an amount equal
to the balance in that account to the New VEBA. |
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B. |
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Existing External VEBA. The assets and liabilities of the DC VEBA
established for mitigation purposes under the 2006 Settlement Agreement (the External
VEBA), including the remaining $1 billion contribution to be made by GM under the 2006
Settlement Agreement in 2011, will be transferred to the New VEBA after the transfer of
assets of the Internal VEBA. |
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C. |
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Temporary Asset AccountCash. On January 1, 2008, GM will establish a
temporary asset account (the TAA) and deposit a contingent cash payment equal to the
difference between $18.5 billion and the value of the UAW Related Account on January 1,
2008. |
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The Final Settlement Documentation and its court approval will provide that on the
Initial Effective Date, GM will also deposit in the TAA (i) $3.8 billion (subject to
adjustment for payments under the 2006 Settlement Agreement) or, at GMs discretion, an
annual amount as described in the amortization schedule under Wages/COLA in Appendix C
to the MOU, and (ii) $1.8 billion or, at GMs discretion, an annual amount as described
in the amortization schedule under Base in Appendix C to the MOU. GM may prefund such
annual payments by paying the applicable buyout amount provided in Appendix C to the
MOU. If GM chooses to pay these amounts either in total on the Initial Effective Date
or later by terminating annual payments through the applicable buyout amount, GMs
payment will include interest on the amount paid from January 1 of the applicable year
through the date of the deposit. |
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GM will transfer the assets in the TAA related to these deposits or an amount equal to
the balance in the TAA related to these deposits to the New VEBA after the transfer of
the assets and liabilities of the External VEBA. |
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D. |
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Temporary Asset AccountConvertible Note. On January 1, 2008, GM will
issue into the TAA a five-year convertible note in the principal amount of
$4,372,500,000, with 6.75% interest payable semiannually (the Convertible Note). GM
may call the Convertible Note at any time beginning three years after issuance. The
Convertible Note may be converted into 109,312,500 shares of GM common stock, $1 2/3
par value (the Converted Stock), (1) if GM provides notice that it is calling the
Convertible Note, (2) within three months before the maturity date, or (3) if in any
quarter, the closing market price of GM common stock is at least $48.00 for at least 20
trading days of the last 30 trading days in the preceding calendar quarter. The Final
Settlement Documentation will include an agreement providing that the Convertible Note
may not be sold or hedged before the Implementation Date. After the Implementation
Date the Convertible Note or the Converted Stock may be sold subject to certain volume
restrictions (maximum 54 million shares per year). After the Implementation Date, the
New VEBA will have the right to demand registration of one public offering of the
Convertible Note or the Converted Stock per year and to participate in public offerings
of securities by GM, under certain circumstances. In private transactions, the New
VEBA may not sell (1) a block of Converted Stock that would be more than 2% of the
outstanding shares of GM common stock to a single buyer, or (2) any Converted Stock to
a holder of more than 5% of the outstanding shares of GM common stock that has
intention to influence GMs directors or management. The trustee of the New VEBA will
vote Converted Stock held in the New VEBA in the same proportion as the votes cast by
all other stockholders in a given election. The Trustee may sell the Convertible Note
or the Converted Stock to a tender offeror only if the tender offer has been
recommended by an independent committee |
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of the GM Board of Directors. After the cash and other investments in the TAA have been
transferred to the New VEBA, the Convertible Note (or another convertible note with
identical terms other than the date of issuance) will be transferred to the New VEBA, as
permitted by law governing contributions of employer securities to a benefit plan and a
VEBA. |
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Shortfall Amount Contributions. On April 1, 2008, GM will make an
initial contribution of $165 million to the TAA. Each year beginning in 2009, if the
annual cash flow projection for the New VEBA shows that the New VEBA will become
insolvent within the next 25 years, GM will deposit $165 million by April 1 of that
year (a Shortfall Amount Contribution) into the TAA or, after the Implementation
Date, into the New VEBA, provided that GM will not make more than 19 Shortfall Amount
Contributions (not including the payment on April 1, 2008 referred to in the previous
sentence). At any time, GM may prefund all future annual Shortfall Amount
Contributions by paying the applicable buyout amount provided in Appendix C of the MOU.
GM will transfer the assets in the TAA related to the initial $165 million deposit and
additional Shortfall Amount Contributions deposited in the TAA or an amount equal to
the balance in the TAA related to such deposit and Shortfall Amount Contributions to
the New VEBA in conjunction with the transfer to the New VEBA described above in
subsection C, TAA-Cash. |
In the MOU, the UAW and GM acknowledged that GMs obligations are fixed and capped and that GM is
not responsible for, and does not provide a guarantee of, (1) the payment of future benefits to
plan participants, (2) the asset returns of the funds in the TAA or the New VEBA, or (3) whether
there will be sufficient assets in the New VEBA to fully pay the obligations of the New VEBA or New
Plan. In the event the assets of the New VEBA are not sufficient to fully fund the obligations of
the New Plan, the New VEBA and New Plan will be required to reduce benefits to plan participants.
Pension Benefits
In the MOU, GM and the UAW agreed to amend GMs hourly pension plan on the Final Effective Date to
provide GM retirees and surviving spouses who are members of the Covered Group and receiving a GM
pension benefit with a flat monthly special lifetime benefit of $66.70, commencing on the first
month following the Final Effective Date. This special lifetime benefit is intended to serve as
cost pass-through to the New VEBA of an after-tax increase in the monthly contribution applicable
to Post-Retirement Medical Benefits under the New Plan for the Covered Group. As a result, the New
Plan will assess an additional monthly contribution of $51.67 to the Covered Group for retiree
medical coverage.
Health Care Reform
The MOU provides that GM will publicly support federal policies to improve the quality and
affordability of health care, and will work cooperatively with the UAW toward that goal. GM and
the UAW have agreed to form a National Institute for Health Care Reform to be effective on or after
the Initial Effective Date, which would conduct research and analyze the current medical delivery
system in the United States, develop targeted and broad-based reform proposals to improve the
quality, affordability, and accountability of the system and educate the public, policymakers and
others about how these reforms could address the deficiencies of the current system. Subject to
adjustment and conditioned on the participation of other U.S. vehicle manufacturers, GM agreed to
make five annual $3 million contributions for this purpose.
Future Contributions
The MOU provides that the UAW and the Covered Group may not negotiate to increase any of GMs
funding obligations under the MOU. In addition, the UAW agreed that it will not seek to obligate
GM to (1) provide additional contributions to the New VEBA, (2) make any other payments related to
providing retiree medical benefits to the Covered Group, and (3) provide retiree medical benefits
through any other means to the Covered Group. Employees may in the future contribute earnings that
they received from wages, profit sharing, COLA or signing bonuses, to the extent that the UAW may
propose.
Accounting Treatment
The MOU, the Final Settlement Documentation, and the Final Effective Date are contingent on GM
securing satisfactory accounting treatment for its obligations to the Covered Group for retiree
medical benefits. GM intends to discuss the accounting for such obligations and for the New VEBA
with the Staff of the U.S. Securities and Exchange Commission (the SEC), and if GM believes based
on such discussions that accounting for the transactions contemplated by the MOU may be other than
(1) a settlement as contemplated by paragraphs 90-95 of SFAS No. 106 Employers Accounting for
Postretirement Benefits other than Pensions, as amended, or (2) a substantive negative plan
amendment that would be reasonably satisfactory to GM, the UAW and GM will attempt to restructure
the arrangement to achieve such accounting. If the parties cannot restructure the arrangement on
terms that GM reasonably believes will provide such accounting, the MOU will terminate.
Conditions Precedent
The MOU is subject, in its entirety, to obtaining a class certification order in a form acceptable
in form and substance to GM, the UAW and class counsel; obtaining District Court approval in a form
acceptable in form and substance to GM, the UAW and class counsel; treatment of the terms of the
2006 Settlement Agreement pursuant to the MOU; GMs completion of discussions with the Staff of the
SEC regarding accounting treatment with respect to the New VEBA and the Post-Retirement Medical
Benefits for the Covered Group as set forth in the MOU, on a basis reasonably satisfactory to GM;
if applicable, a determination by GM that the New VEBA satisfies the requirements of Section
302(c)(5) of the LMRA; and the occurrence of the Final Effective Date.
Termination
The MOU will terminate if: (i) the Final Effective Date has not occurred by December 31, 2011 and
GM and the UAW do not agree to an extension of time to reach the Final Effective Date; or (ii) the
conditions precedent set forth in the MOU are not met by December 31, 2011 and GM and the UAW do
not agree to an extension of time to meet the conditions precedent.
ITEM 8.01 Other Events
On October 10, 2007, GM issued a press release relating to the ratification of the National
Agreement, including the MOU. A copy of the press release is attached to this Form 8-K as Exhibit
10.2.
On October 15, 2007, GM conducted a conference call with analysts and media relating to the
National Agreement, including the MOU. A copy of the presentation is attached to this Form 8-K as
Exhibit 10.3.
Forward-Looking Statements
In this report and in reports subsequently filed by GM with the SEC on Forms 10-K and 10-Q and
filed or furnished on Form 8-K, and in related comments by management of GM, our use of the words
expect, anticipate, estimate, forecast, initiative, objective, plan, goal,
project, outlook, priorities, target, intend, evaluate, pursue, seek, may,
would, could, should, believe, potential, continue, designed, impact, or the
negative of any of those words or similar expressions is intended to identify forward-looking
statements that represent our current judgment about possible future events. All statements in this
report and subsequent reports which GM may file with the SEC on Form 10-K or Form 10-Q or file or
furnish on Form 8-K, other than statements of historical fact, including without limitation,
statements about future events and financial performance, are forward-looking statements that
involve certain risks and uncertainties. We believe these judgments are reasonable, but these
statements are not guarantees of any events or financial results, and GMs actual results may
differ materially due to a variety of important factors that may be revised or supplemented in
subsequent reports on SEC Forms 10-K, 10-Q, and 8-K. Such factors include, among others, the
ability of GM to achieve reductions in costs as a result of the turnaround restructuring and health
care cost reductions and to implement capital expenditures at levels and times planned by
management; our ability to maintain adequate liquidity and financing sources and an appropriate
level of debt; costs and risks associated with litigation; changes in our accounting principles, or
their application or interpretation, and our ability to make estimates and the assumptions
underlying the estimates; the successful completion of collective bargaining agreements with all
unions that represent GM employees/retirees and the legal interpretations of those agreements;
labor strikes or work stoppages at GM; and general economic conditions, in particular health care
costs and investment returns.
We caution investors not to place undue reliance on forward-looking statements. We undertake
no obligation to update publicly or otherwise revise any forward-looking statements, whether as a
result of new information, future events, or other such factors that affect the subject of these
statements, except where we are expressly required to do so by law.
ITEM 9.01 Financial Statements and Exhibits
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10.1
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Memorandum of Understanding Post-Retirement Medical Care |
10.2
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News release dated October 10, 2007 |
10.3
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Presentation on October 15, 2007 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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GENERAL MOTORS CORPORATION
(Registrant)
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Date: October 15, 2007 |
By: |
/s/ Nick S. Cyprus
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Nick S. Cyprus, Controller and |
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Chief Accounting Officer |
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INDEX TO EXHIBITS
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Exhibit |
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Description |
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10.1
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Memorandum of Understanding Post-Retirement Medical Care |
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10.2
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News release dated October 10, 2007 |
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10.3
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Presentation on October 15, 2007 |