General Motors 2010 Annual Report Download - page 127

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
VEBA Modifications
• Modification of its retiree healthcare obligations arising under the 2008 UAW Settlement Agreement under which
responsibility for providing healthcare for International Union, United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW) retirees, their spouses and dependents would permanently shift from Old GM to the New Plan
funded by the UAW Retiree Medical Benefits Trust (New VEBA), such that payment or contribution of not less than one-half
of the value of each future payment was to be made in the form of Old GM common stock, subject to certain limitations.
The UST Loan Agreement provided that if, by March 31, 2009 or a later date (not to exceed 30 days after March 31, 2009) as
determined by the Presidential Task Force on the Auto Industry (Auto Task Force) (Certification Deadline), the Auto Task Force had
not certified that Old GM had taken all steps necessary to achieve and sustain its long-term viability, international competitiveness
and energy efficiency in accordance with the Viability Plan, then the loans and other obligations under the UST Loan Agreement were
to become due and payable on the thirtieth day after the Certification Deadline.
On March 30, 2009 the Auto Task Force determined that the plan was not viable and required substantial revisions. In conjunction
with the March 30, 2009 announcement, the administration announced that it would offer Old GM adequate working capital financing
for a period of 60 days while it worked with Old GM to develop and implement a more accelerated and aggressive restructuring that
would provide a sound long-term foundation. On March 31, 2009 Old GM and the UST agreed to postpone the Certification Deadline
to June 1, 2009.
Old GM made further modifications to its Viability Plan in an attempt to satisfy the Auto Task Force requirement that it undertake a
substantially more accelerated and aggressive restructuring plan (Revised Viability Plan). The following is a summary of significant
cost reduction and restructuring actions contemplated by the Revised Viability Plan, the most significant of which included reducing
Old GM’s indebtedness and VEBA obligations.
Indebtedness and VEBA obligations
In April 2009 Old GM commenced exchange offers for certain unsecured notes to reduce its unsecured debt in order to comply with
the debt reduction condition of the UST Loan Agreement.
Old GM also commenced discussions with the UST regarding the terms of a potential restructuring of its debt obligations under the
UST Loan Agreement, the UST Ally Financial Loan Agreement (as subsequently defined), and any other debt issued or owed to the
UST in connection with those loan agreements pursuant to which the UST would exchange at least 50% of the total outstanding debt
Old GM owed to it at June 1, 2009 for Old GM common stock.
In addition, Old GM commenced discussions with the UAW and the VEBA-settlement class representative regarding the terms of
potential VEBA modifications.
Other Cost Reduction and Restructuring Actions
In addition to the efforts to reduce debt and modify the VEBA obligations, the Revised Viability Plan also contemplated the
following cost reduction efforts:
• Extended shutdowns of certain North American manufacturing facilities in order to reduce dealer inventory;
• Refocus its resources on four core U.S. brands: Chevrolet, Cadillac, Buick and GMC;
• Acceleration of the resolution for Saab Automobile AB (Saab), HUMMER and Saturn and no planned future investment for
Pontiac, which was phased out by the end of 2010;
General Motors Company 2010 Annual Report 125