Judge denies GM retirees' request for committee

NEW YORK — A bankruptcy judge on Thursday ruled that a group representing General Motors Corp.'s salaried retirees cannot form a formal committee to negotiate with the automaker as it attempts to reorganize and emerge from Chapter 11 as a new company.

U.S. Judge Robert Gerber said that since GM had the right to modify or terminate the retirees' health care and life insurance benefits before it filed for bankruptcy protection, the retirees can't challenge the automaker's ability to do so now.

"While I do understand the importance of this to the retirees, I can't grant the retirees rights that they don't have outside of bankruptcy," Gerber said in issuing his ruling.

As part of its restructuring plan, GM plans to continue to pay health-care and life insurance benefits for its 122,000 salaried retirees and their surviving spouses, but those benefits are expected to be reduced, and the retirees will be forced to shoulder a larger share of their health care costs.

Retired hourly workers whose benefits are dictated by contracts with unions like the United Auto Workers are not affected.

The General Motors Retirees Association released a statement later Thursday, saying it was disappointed with Gerber's decision and urging the federal government to help protect the retiree benefits.

"While the GMRA leadership will consider all the legal options available to us, we now look squarely to the Obama administration and to the U.S. Congress to make certain there is a fair process and outcome for all GM retirees," said John Christie, the group's president. "GM retirees always expected to sacrifice as part of GM's restructuring, but one group of retirees shouldn't bear the bulk of that burden."

Neil Goteiner, an attorney for the retirees group, argued in court that given what's at stake for the retirees, the cost of a committee was warranted.

But GM attorney Harvey Miller said that the retirees shouldn't be able to form a committee since the automaker has always had the right to modify salaried retiree benefits and has done so in the past.

"There can still be discussions with GM and there is a group that periodically has had discussions with GM," Miller said. "This would simply add more costs."

Miller added that the formation of a committee could threaten to slow down the sale of GM's assets to a new company. The sale needs to go through as soon as possible if the company is to have any chance of success, he said.

As part of its plan to emerge from court protection, GM plans to sell the bulk of its assets to a new company that would be controlled by the U.S. government.

In exchange for up to $50 billion in financing, the U.S. government will take a 60 percent ownership stake in the new company. The Canadian government would get 12.5 percent.

The United Auto Workers union will get 17.5 percent, which it will use to fund its retiree health-care obligations, while GM's unsecured bondholders would own the remaining 10 percent.