IN THE COOKIE JAR
GM allowed to take up to $6B out of fund
By Sharon Silke Carty, USA TODAY
DETROIT — General Motors' (GM) soaring health care costs have created a tempting pool of money the automaker is considering dipping into.
The hitch: That money is squirreled away in a fund designed to ensure that retirees will have their health care paid for by the automaker. (Related: GM takes $1.1B hit in first quarter)
While discussing first-quarter results Tuesday, GM Chief Financial Officer John Devine said the company is considering tapping into the $20 billion Voluntary Employee's Beneficiary Association fund. The company is entitled to draw out cash equal to what it spent last year on health care and what it has spent so far this year.
That means GM could take $6 billion from the fund, Devine said, because its health care costs have been rising. For the first quarter alone, the company could account for $700 million in health care expenses. Once it takes money out of the fund, it is not required to replace it. And the money could be used for general business expenses, Devine said.
"It is a source of liquidity if we need it," he said. "We can extract it pretty aggressively, if we have to."
Health care costs are a concern for the automaker. It expects to spend $5.6 billion on health care for active and retired workers and their families this year, compared with $5.2 billion last year. That adds more than $1,000 to the price of each vehicle it produces, the company has said.