(Reuters) - A federal judge said General Motors Co is not required to pay $450 million to cover medical benefits for retirees, in a defeat for the United Auto Workers union.
In a 36-page decision, U.S. District Judge Avern Cohn in Detroit said on Tuesday that the current GM did not assume any obligation for the payment, which the automaker had contracted to make two years before its June 2009 bankruptcy filing.
The payment had been part of a June 2007 contract between the old GM, its former Delphi Corp affiliate and the UAW.
It was not, however, included in a different contract over medical benefits signed in July 2009 by the GM that emerged from Chapter 11.
The UAW claimed that the new GM owed the money by virtue of Delphi’s own emergence from bankruptcy in October 2009.
Judge Cohn, nonetheless, said the language of the 2009 contract made clear that GM did not owe the payment.
He added that U.S. Bankruptcy Judge Robert Gerber in New York, who oversaw GM’s bankruptcy, found the contract fair, reasonable and in retirees’ best interests.
“Whether New GM has a moral obligation regarding the payment is another matter and not relevant,” he wrote. “The UAW’s efforts to turn the absence of language into language is reminiscent of the efforts to capture a ‘will o’ the wisp.’”
UAW President Bob King in a statement said the union is evaluating the decision and considering whether to appeal.
“We are disappointed with the Court’s decision in this case, which seeks to protect benefits for retirees who worked all their lives to help make GM and Delphi successful,” King said in a statement.
Roughly 48,500 current GM workers are represented by the UAW, a spokeswoman for the union said.
GM spokesman Dave Roman declined to comment on Cohn’s decision.
Chapter 11 reorganizations can allow debtors to reject obligations that predate their bankruptcies.
On Monday, the federal bailout of GM ended when the U.S. Department of the Treasury said it had sold the last of its shares of the Detroit-based automaker.
The case is United Auto Workers v. General Motors LLC, U.S. District Court, Eastern District of Michigan, No. 10-11366.
Editing by Jan Paschal, Bernard Orr