GM Cuts May Not Be Enough

Union workers at General Motors Corp. ratified a deal to help the automaker cut billions of dollars in healthcare costs, but analysts said the move was far from enough to turn things around at the struggling auto giant.

Welcoming the ratification, which was announced by the United Auto Workers union Friday, GM said the deal would slash its long-term retiree healthcare liability by $15 billion and reduce healthcare expenses by about $3 billion annually before taxes.

GM shares rose more than 4% on news of the deal after sinking to a 23-year low Thursday on fears about mounting financial woes at GM and a possible strike at its main auto parts supplier, Delphi Corp.

“The deal is a move in the right direction, but no one thinks this is the end to their problems,” Argus Research Group analyst Kevin Tynan said. “The laundry list of the things that GM needs to do to fix itself is about a dozen items long, and this deal was a small item on that list.”

Since GM announced the healthcare agreement with union leaders in October, it has received subpoenas from the Securities and Exchange Commission concerning its reporting of pensions and other retiree benefits.

Its U.S. auto sales dropped 26% in October, and GM said Wednesday that it would restate earnings for 2001 and for the second quarter of this year.

Under the terms of the deal, healthcare will no longer be free for retired hourly workers, their spouses and dependents.

Most will pay a maximum of $752 a year for their family healthcare coverage, including monthly premiums. Drug co-payments are not included.

GM shares rose 97 cents to $24.48.