General Motors National
Retiree Association
Over The Hill Car People
Established 2003
Subjects Discussed In GM Conference Call June 1, 2009
June 1, 2009 GM Telephone conference with Retiree Club Presidents
Speakers: Katy Barclay, Preston Crabill, and Brenda Curry
Katy Barclay spoke on the 363 Sale – The strongest parts of GM will be sold to a new company that is backed by the U.S. Treasury, the government of Canada, the United Auto Workers, the Canadian Auto Workers, and a substantial portion of GM’s current bondholders. This sale will be completed quickly using the Chapter 11 tool. This process has proved successful for a number of companies over the years. With the court-approved sale, the hope is that the “New GM” will be launched within a 60-90 day period. Katy stressed, as did Fritz Henderson when he spoke in New York, that speed is really essential to preserve the revenue for the company. The “New” company will be built with the best of GM’s assets – that would be the best brands, the best operations that is in the company today and it will be supported by a much stronger balance sheet. According to Katy the employees of GM have been preparing for this for a very long time and they are very well prepared to move forward quickly.
GM subsidiaries outside of the U.S. are not part of the bankruptcy filing and when the plans with Magna, International are finalized the New GM will hold a minority interest in the assets of the Opel Vauxhall brand. All of the current GM operations as well as their subsidiaries will continue to operate as normal; everything is open for business, nothing has changed. The operating structure of the company is still, as in the past, a global organization but it is going to be significantly more a mix of wholly-owned and partially-owned relationships – more partners and different kinds of venture relationships.
As a New GM is set-up, the business plan, as discussed publicly and with the U.S. Treasury, involves a very significantly lower break-even point which means continuing to lower costs to meet about a 10 million unit industry break-even point in the U.S.
In support of GM dealers and customers, there is a revitalized GMAC – re-capitalized and stronger to support dealer floor plans and customers from a financing perspective.
“Importantly, to succeed in this industry today, we have to win in the United States.” In the new company there will be four very strong core brands, a U.S. dealer network that is significantly stronger and smaller (about 3600 dealers). Each brand must be successful in its own accord and bring revenue to the table in the new GM enterprise.
Two documents filed in court with the broader filing consisted of:
First Day Motion – This includes the request to continue the payment of wages and benefits for active and retired employees. So wages and qualified benefits will continue to be paid – the Salaried Retiree Plan is a qualified plan. Health care, life insurance and other welfare benefits will continue to be paid while GM is in the Chapter 11 process.
The second document that was filed in the area of employee/retiree compensation and benefits is related to the 363 Master Sale and Purchase Agreement between General Motors and the purchasers (U.S. Treasury, Canadian government, the UAWs, and bondholders). This filing notes that certain qualified and non-qualified benefits will be negatively impacted in the new company for current retirees and future retirees in support of lowering the unfunded obligations on the balance sheet. Ms. Barclay stated that in conjunction with this particular filing it is important to note that in 363 situations with other companies these unfunded post retirement obligations are most always eliminated, “but we at GM have been very diligently working to carry forward as many of these obligations as we can.” The U.S. Treasury has asked GM to look at the following five unfunded obligations to make cost reductions: (1) basic life insurance for retirees; (2) salaried health care for retirees; (3) unfunded pension obligations for SERP; (4) unfunded executive life insurance; (5) health care and life insurance for non-UAW union retirees. The treasury gave GM a set of guiding principles that need to be used as GM reduces approximately two-thirds of the obligations in those particular benefit plans. These reductions will be made in the aggregate, not by each individual benefits to achieve the two-thirds reduction in liabilities. GM is still in discussion with the U.S. Treasury on the structure of these obligations and the allocation of those reductions. GM does not have resolution on that as yet, but expect to have resolution within a week. GM will let us know as soon as they receive clarity on what the new GM benefit plan will be.
GM is committed to on-going communications with retiree club presidents and retirees to make sure that they answer our questions and address our concerns, particularly during this very critical time as GM goes through Chapter 11 process and that the lines of communication remain open with us.
In closing Katy Barclay stated, “You have his (Fritz Henderson) commitment and the commitment of the entire GM team to devote all of our collective energy in making this company, the New GM, very, very, successful given the new structure that we have going forward. We all know here at GM that we have a tremendous responsibility to all of our stakeholders, and our stakeholders include all of you – all of our retirees who are an extremely important part of our GM family.”
Some of the comments and questions dealt with getting further clarification on the material all ready handled in this and previous telephone conference calls.
When asked if the two-thirds reductions should be considered as permanent, the response was that although it is very difficult to predict what may occur in the future, it is very unlikely that any of the cuts will be re-instated in the future. When asked if the two-thirds reduction discussions are between GM and the court or GM and the Treasury, the response was that the Treasury will have the final say and it is not up to the court.
The GMS and Ambassador programs will continue unchanged.
Regarding the GM card – GM will continue honoring money earned through purchases on the card.
The GM Leasing Program was driven by the credit market and since that market has virtually dried-up the leasing program became unavailable. In the future as the credit market begins to free-up we may see more lease programs become available.
These notes are to the best of my memory and should be verified with GM Benefits/Personnel and others.
Nancy
June 2, 2009
Here some additional information based on the call
yesterday.
Katy talked about the second filing, the "363" Master Sale and Purchase
Agreement between GM and the various purchasers (UST), Canada & Ontario,
UAW, Bondholders) notes that certain qualified and non-qualified benefits
will be negatively impacted in the new company for current and future
retirees in support of lowering unfunded obligation on the balance sheet.
The U.S. Treasury has asked us to look at the following unfunded
obligations for cost reductions
Basic Life Insurance for retirees
Salaried Health Care for retirees
ERP/SERP obligations
SGLI/SLBP (executive life insurance) and,
Obligations for non-UAW union retirees
The U.S. Treasury gave us guiding principals that require approximately a
2/3 reduction in the programs above. The reductions will be made in the
aggregate and not by benefit. We are still in discussions with the U.S
Treasury on the structure of these obligations and the allocation for those
reductions, and expect to have a resolution within a week. We will
communicate with you as soon as we know what the new GM's benefit plans
will be.
What to expect going forward:
Will inform you on benefit information as soon as we have agreement with
the UST
Ongoing commitment to answer your questions and concerns as we move
through this process
Katy's statement to the Retiree Club President- These decisions are heart
wrenching..extraordinarily difficult, but it's what we have to do to secure
our company's long-term future.
For additional information go to the following websites:
http://www.gm.com/restructuring/
http://www.gmreinvention.com/index.php
(See attached file: Dear GM retiree.docx) (See attached file:
Q&Ajune2.docx)
Lot of information, but if there is any unanswered questions, please do not
hesitate to contact me. Thank you for all your support and patience.
Brenda Curry
Retiree Communication
Answer Me Now
Q. Will GM return to leasing vehicles in the future?
A. We would love to return to having more leases in our new car sales. The
limiting factor now is the limited availability funds. Lease support is the
most expensive form of new car incentive, and until there is a much more
robust secondary market to resell leases that are generated, we probably
won't see finance companies getting back into them quickly. We understand
that lease incentives drive new car sales volume and hope we can see
additional availability of affordable leases in the future. In the
meantime, we have very attractive 0% financing offers, loyalty incentives
and other tools to make purchasing a new vehicle very affordable. (posted
5/5/09)
June 2, 2009
Retiree
What happens to retiree benefits?
Between now and the close of the sale of GM’s assets to the New GM, we do not expect there to be any changes to the qualified pension plans, health and life insurance benefits that GM currently provides to retirees, survivors and beneficiaries. It is too soon to know with certainty how benefits for retirees of our [U.S.] operations may be affected once sale to the New GM has been completed. However, we do anticipate a reduction of certain benefits in the future.
We can also provide assurance as to the following:
The assets in GM’s qualified pension plan are not available for creditor claims. Federal law protects the funds in qualified pension plans, such as GM’s, from the claims of a company’s creditors. This means that GM cannot use pension plan assets to meet its obligations or to pay its debts.
Federal law protects qualified pension plans from retroactive changes to plan benefits. Further, qualified pension plans cannot be terminated unless they meet the standards for termination set out by federal law, and a decision to seek to terminate a pension plan would have to comply with those standards. The Pension Benefit Guaranty Corporation also provides an additional layer of protection for defined benefit pension programs.
Can I still file my health care insurance claims?
Yes. You can and should file your health care claims as you normally would. For those retirees who many have health savings accounts, you should use those as you normally would.
What do I do if my health care shows as cancelled?
You should contact the GM Benefits & Services Center immediately at 1-800-489-4646 to discuss the status of your health care coverage.
Will I continue to receive my $300 pension benefit?
The $300 level benefit is a pension benefit. The GM Retirement Program for Salaried Employees (SRP) is a qualified retirement program, protected under the Employee Retirement Income Security Act of 1974 (ERISA).
Are the assets in GM’s pension plans protected from creditors’ claims?
The GM Hourly-Rate Employees Pension Plan (HRP) and GM Retirement Program for Salaried Employees (SRP) are qualified retirement programs, protected under the Employee Retirement Income Security Act of 1974 (ERISA). The assets held in the pension trust are not available for creditor claims.
What is the current status of the pension plans? Are the GM Hourly-Rate Pension Plan (HRP) and GM Retirement Program for Salaried Employees (SRP) fully funded?
Both the HRP and SRP are funded separately. As of December 31, 2008, the HRP was 84% funded, representing a $10.9 billion deficit. As of December 31, 2008, the SRP was 95% funded, representing a $1.5 billion deficit.
Under what circumstances can the PBGC take over a corporate pension?
Based on comments from the PBGC’s web site, “The PBGC (www.pbgc.gov) takes responsibility for paying benefits to current and future retirees when a pension plan runs out of money, when a company liquidates and has an underfunded plan, when the PBGC must end a plan to protect participants and the insurance fund, or when a sponsoring company demonstrates it cannot continue funding a pension plan and stay in business.”
What are the maximum levels of PBGC-guaranteed benefits if the GM U.S. Pension Plans were to be terminated?
Per the PBGC website, “The overwhelming majority of the participants in plans taken over by the agency face no reduction in benefits due to the legal limits on coverage, PBGC research shows. The largest reductions occur in cases where participants earn pensions that 1) significantly exceed the maximum insurance benefit, or 2) provide generous early retirement subsidies. Under the PBGC’s single‐employer insurance program, retirees sometimes can receive more than the maximum guaranteed benefit. In general, three conditions must apply: 1) the participant earned a benefit in excess of the maximum guaranteed amount; 2) the participant retired or was eligible to retire at least three years prior to plan termination; and 3) the plan had sufficient assets to pay benefits above the guaranteed amount.” The PBGC maximum benefit in 2009 for a single retiree who retires at age 65 is $54,000 per year. For a single retiree who retires at age 62 (the age at which the U.S. Pension Plans provides for an unreduced for age benefit) the maximum benefit is $42,660 per year. For a single retiree who retires at age 55 the maximum benefit is $24,300 per year. These amounts are reduced for retirees who elect a 50% surviving spouse (Joint and Survivor) benefit. For more information regarding the PBGC pension benefit guarantees, you may wish to visit the PBGC website at www.pbgc.gov.
How does this impact life insurance coverage?
Employee and retiree life insurance coverage amounts continue unchanged at this time. Claims can continue to be filed in the normal manner.
Will I still receive my GM vehicle discounts?
There is no plan to change the GM vehicle discount program
Is my S-SPP or PSP 401(k) part of the GM bankruptcy?
Amounts contributed to a 401(k) plan (S-SPP or PSP) by or on behalf of a participant constitute assets of the 401(k) plan and are held in trust for the benefit of the participant. The participant’s 401(k) plan assets do not belong to the plan sponsor (GM), and are segregated and separate from the plan sponsor’s (GM's) assets. Therefore, a participant’s 401(k) plan (S-SPP or PSP) assets, including any employer contributions, are not property of General Motors and cannot be reached by GM creditors in a bankruptcy proceeding.
Where can I get more information about the S-SPP and PSP Plans?
Information regarding the GM S-SPP and PSP Plans is available by going to gmbenefits.com and clicking on “GM Savings Plans 2009 Prospectus.”
The sale agreement references necessary reductions under salaried plans, executive plans and non-UAW hourly plans. What does this mean?
General Motors is working with the U.S. Treasury to reduce some retiree benefit obligations by roughly two-thirds. This reduction will impact salaried retiree life insurance, salaried retiree health care, executive non-qualified pension, executive retiree life insurance and non-UAW hourly life and health insurance and we are still working on how to accomplish this in the most appropriate way. We are currently in discussions with the U.S. Treasury regarding the reductions and we will communicate to the affected employees and retirees as soon as this matter is resolved. It is our intent to address this matter as quickly as we can.
Who can I contact with additional questions?
RETIREES WITH QUESTIONS MAY CALL 1-800-489-4646
Public FAQ/Website
Does this mean GM is going out of business?
Absolutely not! GM has entered chapter 11 to launch the New GM through the powerful tools of the Bankruptcy Code. GM will take the necessary actions to transition operations and launch a highly competitive New GM. Importantly, GM has the support of the U.S. and Canadian governments and the UAW in this effort.
What is the difference between chapter 11 and chapter 7?
It is common for people to mistakenly think of chapter 7 liquidation when they hear the word “bankruptcy.” We are not liquidating. Chapter 11 and chapter 7 involve two very different outcomes. Companies go out of business under chapter 7. Chapter 11 is different – it is designed to allow companies to continue operating to preserve their going concern value and through the bankruptcy code emerge as viable businesses.
What are some key attributes of chapter 11?
Some key Chapter 11 attributes are the following:
· Chapter 11 is not a declaration of insolvency.
· Companies don’t file chapter 11 to liquidate; they do so in order to continue operating and to take the necessary steps to emerge as a financially stronger business, reorganizing their operations or balance sheet or in some cases by selling substantially all its assets.
· Management remains in control of the business during the chapter 11 rehabilitative process. Trustees, administrators and monitors typically are not appointed.
· Chapter 11 normally does not cause interruption to business operations.
· The company is given breathing room during the process – an “automatic stay” generally prevents parties from taking legal action against the company or taking the company’s assets.
· Specific benefits include that the company can:
o sell its assets free of liens or encumbrances;
o obtain “debtor in possession financing” to fund ongoing operations during the chapter 11 case;
o “reject” unprofitable contracts and leases .
What is section 363 and how is it being used to launch the New GM?
Section 363 permits a company in chapter 11 to sell assets and in some cases substantially all its assets. GM intends to use that ability to sell the strongest parts of its business to launch a new and successful enterprise. The purchaser’s business will be built upon only the strongest parts of our business – our employees; our best brands (Cadillac, Chevrolet, Buick, GMC), and the plants and other hard assets that those brands rely on; the contracts we need to secure supplies and keep our business moving; and the equity we own in our domestic and global subsidiaries. The New GM will be led by GM’s current management team.
Why did GM choose the section 363 path?
With the support of our largest secured lender, the U.S. Treasury, section 363 allows GM through a court-supervised sale, to create and launch the New GM quickly. We currently hope to close the transaction in 60 to 90 days from June 1.
How is the New GM being launched?
It is anticipated that the valuable assets of GM will be sold to a new entity to quickly launch a leaner, more customer-focused and more cost-competitive automaker, with a much stronger balance sheet that is positioned for profitability. The New GM will be built from GM’s strongest brands and operations.
How long will it take to launch the New GM?
We anticipate a relatively quick process. GM expects to receive court approval to sell the assets to New GM within about 30 days after filing, and to complete all of the business transition activities needed to launch New GM’s operations within about 30 to 60 days after court approval. The steps between now and New GM’s launch will ensure that the section 363 requirements are met and that there is a smooth transition from GM’s current business to the New GM.
What will happen from now until New GM is launched?
We expect that the transition will be completed in 60 to 90 days from June 1. In the meantime, GM has the support of the U. S. Treasury and Canadian government to transition operations to the New GM. This support includes the U.S. Treasury’s agreement to fund this effort. For more specifics about what happens before New GM becomes effective, please see the “Frequently Asked Questions” for suppliers, customers, dealers and retirees.
Will the chapter 11 be completely over after New GM exits?
An important advantage of the 363 process is that it allows the New GM to quickly make a clean and complete break from chapter 11. When the New GM launches, the chapter 11 case will be over for all of the operations that GM customers interact with. For GM’s operations that will not become part of the New GM, the chapter 11 case will continue in order to resolve creditors’ claims and wind down those operations in an orderly way.
Is GM still using the same viability plan it announced on April 27th?
Yes. The New GM will execute the key elements of its April 27 viability plan, along with additional initiatives, to achieve winning financial results by putting customers first, concentrating on adding to the company’s line of award-winning cars and trucks through on four core brands and continuing to invest in green, energy-saving technologies.
What are the steps to launching the New GM?
1. Before the filing, GM and its largest secured lender, the U.S. Treasury, and the Canadian and Ontario governments, negotiated agreements providing for the sale of assets to the New GM.
2. GM filed a motion with the court asking the court to approve the sale of assets to New GM.
3. The court approved procedures related to the sale on June 1, 2009 and set the final hearing on the sale for June 30, 2009.
4. GM will notify its creditors that it is seeking approval of the sale to New GM.
5. Other parties who want to purchase the assets may submit bids as part of the requirement that GM accept the “highest or best” offer for the assets. This must be done by June 22, 2009.
6. Parties to contracts that will be assigned to the New GM will be notified.
7. The court will hold a hearing to approve the sale on June 30, 2009.
8. The U.S. Treasury and the Canadian and Ontario governments are supporting the New GM sale transaction, which we expect will take approximately 30 to 60 days from court approval of the sale.
How is GMAC impacted by this filing?
GM and GMAC intend to continue their current relationship and to honor their obligations to each other in the ordinary course. Any questions relating to impacts on GMAC outside of the operating relationship between GM and GMAC should be addressed to GMAC directly.
NYSE Delisting Statement:
GM received notice from the NYSE on June 1, 2009 that it intended to suspend trading of GM common equity effective June 2, 2009 and would move to begin the delisting process.
If GM’s common stock is delisted by the NYSE, market makers not affiliated with GM may initiate limited trading in one of the over-the-counter markets. Stockholders are advised to consult with their personal financial advisors concerning investment decisions and questions concerning how to trade shares.
What happens to the shares currently outstanding?
We expect they will continue to trade over the counter while GM is being wound down.
What does this mean for GM’s current customers and future car buyers?
For our current customers, GM will succeed and win by taking care of you every day. There will be no interruptions in GM’s ability to take care of our customers and honor customer programs, warranties and provide replacement parts. In fact, GM the court has authorized GM to honor customer warranties and programs as it always has. You should have total confidence that:
· Our products are safe and sound;
· We will honor your existing warranty;
· GM dealers will have the same access to replacement parts as they always have;
· Customers of discontinued brands or dealerships that have closed as part of GM’s viability initiative will continue to be supported by other GM dealerships;
· Customer promotions and incentives will continue without interruption;
· You do not need to do anything differently regarding your warranty;
· There is no impact on OnStar service; your OnStar subscription will remain in place
· GM continues to have a nation-wide network of Goodwrench technicians trained to perform maintenance and repairs on your GM vehicle
This is good news for customers who want to buy cars from an automaker with an award-winning lineup of cars and trucks with rock-solid warranties and other customer-support programs, one that is a leader in green technology, and one that has a promising future. All customers should have confidence in New GM’s ability to serve the needs to customers in every way, including the commitment and ability to honor warranties for many years to come.
Will New GM honor customer warranty claims?
Yes. GM will succeed and win by taking care of our customers every day. New GM will assume the obligations to support the express warranties issued by GM to its customers.
Will customers still be able to get service parts to repair their vehicles?
Replacement parts are, and will continue to be, available to service and maintain GM vehicles. Customers can be assured that GM and our dealers are open for business and are committed to meeting the service needs of our customers now and well into the future.
Did my GM Card earnings program change? Are my earnings still valid?
We intend to continue honoring customers’ GM Card earnings. In its first day motions GM asked the Court to maintain the GM Card program. Customers can continue using their GM Card at more than 18 million locations where MasterCard is accepted.
Who can I contact with additional questions?
CUSTOMERS WITH QUESTIONS MAY CALL:
1-866-405-4005
01234060209298