GM, auto workers reach deal on health costs

Under the agreement, GM would expand eligibility for some benefits to former GM employees who became employees at auto supplier Delphi. GM spun off Delphi in 1999, and the auto supplier filed for bankruptcy protection earlier this month. GM had said it could be liable for anywhere from nothing to $11 billion in benefits for Delphi employees, but the company said that now could reach $12 billion because of the new agreement. Devine said it’s more likely GM’s liability will be about half that amount.

In its earnings report, GM said its loss excluding special items amounted to $1.1 billion, or $1.92 a share, far more than the loss of 87 cents a share expected by analysts surveyed by Thomson Financial.

Total revenue was $47.2 billion for the quarter, up 5 percent from $44.8 billion in 2004.

Wagoner said the results were disappointing but the company is moving ahead with its turnaround plan. He said the company is on track to reduce 25,000 manufacturing jobs and close several plants by 2008, a goal it announced earlier this year. GM plans to announce more details about that plan before the end of this year, Wagoner said,

GM expects to reduce its costs for plants and employees by $5 billion by late 2006, Wagoner said. In addition, GM wants to reduce its materials costs by $1 billion next year by using lower-cost suppliers.

Wagoner said the company is confident consumers will respond to its new vehicles, including a lineup of more refined and fuel-efficient SUVs.

“I think we’re trying to address the issues we face very proactively. We’re not relying just on cost reductions,” Wagoner said.

Wagoner wouldn’t say whether some of his turnaround plans have been accelerated since billionaire investor Kirk Kerkorian acquired a 9.9 percent share in the company this month. Kerkorian’s investment firm, Tracinda Corp., has said it may seek a seat on GM’s board.

GM’s North American division lost $1.6 billion in the quarter versus a loss of $88 million a year ago. The automaker’s North American market share was down to 25.6 percent from 28.5 percent a year ago.

GM Europe reported a loss of $150 million in the quarter compared with a loss of $236 million a year ago, but earnings more than doubled in GM’s Asia Pacific region to $176 million from $78 million earned in the year-ago quarter.

FREE VIDEO GM reaches deal with union Oct. 17: GM CEO Rick Wagoner discusses his company’s tentative agreement with the United Auto Workers over health care costs, appearing on CNBC Monday. CNBC

GMAC earned $675 million in the third quarter, up from $620 million in the same period in 2004. Wagoner said GM is looking for a partner to buy a controlling interest in GMAC and restore the division’s investment-grade rating. GMAC has had a harder time borrowing money since its credit rating was downgraded to “junk” status along with GM earlier this year.

The tentative health care agreement with the UAW includes contributions to a new, independent voluntary employee benefit plan, which will be partially funded by GM. GM said it will contribute $1 billion annually to the fund in 2006, 2007 and 2011.

Wagoner said the modified plan will continue to provide high-quality health care for GM’s hourly workers and retirees. He said more details will be released soon.

Wagoner said some job reductions will happen through attrition, but he acknowledged the process will be a difficult one.

“We will do our best to minimize this impact on each of you and your families,” he said. “We hope you will understand that, with these difficult actions, we will help to ensure a viable and growing GM for the future.”

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