General Motors on Thursday won the dismissal of a lawsuit in a US appeals court initiated by the United Auto Workers union, allowing the largest US automaker to escape claims from the union it had to pay $450 million in medical benefits costs for an affiliate’s retirees.
The sixth Circuit Court of Appeals in Cincinnati, formed from a three-judge panel, decided that GM assumed the obligation of payment just two years before its 2009 bankruptcy and after that a later deal with the UAW union actually made the company’s responsibility void. The payment was negotiated back in 2007 in a contract agreement that implicated the former General Motors company, the UAW union and bankrupt auto parts supplier Delphi Automotive. The payment obligation was later on not included in the new contract on medical benefits that was negotiated and signed in 2009 by the new GM entity that was formed as it emerged from Chapter 11 bankruptcy reorganization. The Chapter 11 system allows the company in debt to abolish obligations that were assumed prior to the bankruptcy procedure.
The United Auto Workers on the other hand believed the new company established as General Motors was still accountable for the financial obligation because Delphi also emerged out of bankruptcy in October 2009. The 6th Circuit, which upheld the decision of a lower court, decided the 2009 deal made it impossible for Gm to assume responsibility once more. Thus, GM was absolved by the UAW from the obligations related to the provision of retiree medical benefits.