General Motors has decided to prepay US$1.2 billion in outstanding debt to the Auto Sector Retirees Health Care Trust (asrTrust) in Canada.
“This payment puts to rest any fear that GM might somehow walk away from its funding obligations to the healthcare trust,” says Jerry Dias, the national president of Unifor, which is the new union created through the merger of the Canadian Auto Workers and the Communication Energy and Paperworkers unions.
The asrTrust was created as a result of the restructuring of GM Canada during the financial crisis.
Under the plan, responsibility for payment of healthcare benefits to current GM retirees (as well as for current GM employees at that time, after they retire) was transferred to the independent trust.
Trust officials are now reviewing the implications of GM’s prepayment for the trust’s management strategy. Its ability to cover future retiree health benefits depends on the amount of capital invested in the fund, investment returns, future healthcare cost inflation and other factors.
“GM’s payment of the notes removes one of the risks we originally faced when the asrTrust was created; namely, the risk that GM might not complete its schedule of payments into the trust,” Dias adds.
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