General Motors of Canada Ltd. will put $2.535 billion into a trust fund to finance health care costs for its retirees, the Globe and Mail reports.
The fund is expected to save GM Canada billions of dollars because retiree health care costs will be taken off its books.
But it means reduced benefits for about 30,000 retirees and surviving spouses of GM workers.
GM Canada has reached an agreement with representatives of its unionized retirees to finance the fund with an initial cash payment of $1 billion, plus another $1.535 billion in contributions between 2014 and 2018.
The creation of the trust fund to pay for dental care, glasses and other health benefits was a condition of the $10.8 billion contribution the federal and Ontario governments made to the bailout of GM Canada's parent company, General Motors Co.
The agreement with the retirees is subject to approval by courts in Quebec and Ontario, but it is opposed by a group of retirees from the company's massive operations in Oshawa, Ont.
"The contributions by GM Canada to the Auto Sector Retiree Health Care Trust will not be sufficient to maintain the retiree health care benefits at their current levels," says an information package prepared for retirees.
"Consequently, it is expected that benefits will have to be reduced or otherwise modified to ensure that the available funds will be sufficient to look after the needs of current and future retirees for their lifetimes."
Estimates done by actuaries for the retirees show the value of the plan represents between 77 per cent and 84 per cent of the value of the existing coverage, which was financed by GM Canada and adjusted according to contracts negotiated with the Canadian Auto Workers.
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