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 The union and attorneys representing several retirees sued GM on Thursday in U.S. District Court in Detroit in an effort to get court approval of the change. It would cover about 500,000 GM retirees and spouses, plus current UAW workers when they retire.
The lawsuit is not a hostile action. GM will not oppose its major points and joined the UAW and retirees in filing a settlement agreement that would govern how the trust would be run.
If the court approves, the trust will take on $46.7 billion in health care costs starting as early as Jan. 1, 2010.
According to court records, GM will pay $33 billion to $36.5 billion into the trust, called a voluntary employees beneficiary association, or VEBA.
GM, Ford Motor Co., Chrysler LLC and the UAW all agreed to form trusts in contract talks last year, and court approval similar to that needed for the GM trust is required in the Ford and Chrysler cases. The court needs to approve the change because the retirees are affected by the new contracts, but were not involved in those negotiations.
The Detroit Three automakers combined have about $86 billion in retiree health care liabilities on their books. Shifting them to the trusts was the linchpin of the historic four-year deals they reached with the UAW and is considered key to making the U.S.-based companies cost-competitive with Asian automakers.
GM alone said the new contract will save it $3 billion per year, with a big chunk coming from reduced retiree health care costs.
Formulas for the companies' contributions to the trusts are complex, with varying levels of cash and notes that are convertible into stock, and further payments if the funding level drops.
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 The UAW has said that the trusts will secure health benefits for retirees for 80 years, no matter what happens to the automakers' finances.
"GM can't cut benefits for our retirees, or threaten to cut them," UAW Vice President Cal Rapson said in a statement. "And since the money for our benefits will be paid up front, our retirees will have important protections in case of changes in GM's financial condition."
Under the agreement filed with the court, the GM VEBA trust would be run by an 11-member committee, with six members picked by the court and five chosen by the UAW.
Retiree health benefits will continue without change at least through 2011. After that, the committee has the authority to change the benefits, according to the court documents.
"Whether benefits or participant contributions would have to be adjusted by the VEBA trustees thereafter will depend on many factors, including whether GM remains financially viable so it can make the required payments on time," the court records say.
Health care experts have said that since the companies are paying the trusts less than the total retiree health care costs, the trusts will have to invest wisely and work to cut costs in order to remain solvent.
The agreement says the committee running the trust will be governed by a code of ethics that stops members from holding a substantial interest in any business with which the trust has a relationship.
Judge Robert H. Cleland has scheduled hearings for March 4 and June 3 to determine if the agreement is fair to retirees.
[Associated Press; By TOM KRISHER]
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