REFILE-GM retirees watch, worry as day of reckoning nears

(Corrects spelling of Zac Efron in second to last paragraph)
By Soyoung Kim
DETROIT, April 26 (Reuters) - John Martinez, a former
autoworker, feels as though he is watching his future sink as
General Motors Corp slips closer to failure.
Pressured to take an early retirement in April, Martinez
had been pinning his hopes on GM's once-generous pensions and
health-care benefits to help look after his four children and
his disabled father, also a GM hourly retiree.
But with the 100-year-old industrial icon teetering on the
brink of bankruptcy, Martinez and the nearly 1 million other
Americans who rely on the automaker for healthcare and pensions
face new risks and heightened uncertainty.
"It's scary. It's like I don't know my future," Martinez,
51, said at his house in Lincoln Park, a working class suburb
of Detroit. "If they go bankrupt, I'm at their mercy."
Martinez is looking for a new job but remains cautious
about his prospects of finding something quickly in Michigan
where the jobless rate led the nation at 12.6 percent in
March.
"I never wanted to leave GM. I am still too young,"
Martinez said. "If I lose any more, I don't know if I can
sustain mortgages and bills."
GM has until the end of May to win deep concessions from
bondholders and the United Auto Workers union. The Obama
administration has said bankruptcy is an option.
At stake is the future of some $20 billion in debt GM owes
into a retiree health-care trust that the automaker and the UAW
agreed to create as part of a cost-saving contract in 2007.
The trust, which UAW President Ron Gettelfinger had said
would safeguard retiree healthcare for 80 years, is now
unraveling before it even begins its first year.
GM has pledged to pay $7.6 billion to the trust fund by
next year, but that is cash it does not have and cannot afford
to pay. As a result, negotiations are under way with the UAW
that would give the union GM stock instead of cash.
For GM, which has taken $15.4 billion in U.S. government
loans since the start of the year, such a deal is seen as
crucial to its emerging from a restructuring -- and potentially
bankruptcy -- as leaner and profitable.
Among other problems, GM has been burdened by the legacy of
costly benefits. As of last year, the top U.S. automaker had
been paying health-care costs for almost 10 beneficiaries for
every one of the roughly 140,000 workers on its payroll.
But for GM retirees, the result of taking a riskier asset
in GM stock instead of cash to offset future health-care costs
is certain to be higher out-of-pocket expenses, analysts say.
"The plan was underfunded to begin with," said Lance
Wallach, a financial consultant who specializes in such
health-care trusts. "Now, it's a joke."

'BACK TO WORK JUST TO SURVIVE'
Smoking outside a GM union hall in Warren, another working-
class suburb north of Detroit, Wayne Pierce said he never
thought he would see GM toppling like this.
Pierce, 62, retired in July after 25 years as a mechanic at
GM's technical center. He had worked 42 years in UAW jobs,
including his earlier days with Chrysler.
"If they take out my pensions and healthcare, I have to go
back to work just to survive," Pierce said. His big concern, he
said, would be losing health insurance benefits, since his
wife, Peggy, suffers from arthritis and diabetes.
"I don't know how GM has got to this point," he said. "I
never imagined my life would wind up like this. This was not my
game plan."
As GM's talks with the UAW play out, the automaker is also
seeking a deal with bondholders to reduce some $28 billion they
are owed. Like the UAW, bondholders face pressure to convert
GM's debt to them into equity. Those talks have stalled after
U.S. officials rejected a request from bondholders that the
government guarantee a portion of their debt.
"What if they just collapse and the stock becomes
worthless? It's scary. That's why bondholders don't want to do
it," said Tom Puwal, a 77-year-old GM retiree.
GM shares, which ended 2007 at nearly $25, now stand at
less than $2. Analysts see little chance of any recovery for
current shareholders in a bankruptcy.
For John Martinez and his wife, Elizabeth, hedging against
GM's failure means cutting back at the grocery store and
dropping the small extravagances for their three school-aged
children.
Their youngest daughter, 11-year-old Elisa, has a bedroom
covered with half a dozen posters of Hollywood teen heartthrob
Zac Efron. But the family can't afford those kinds of
collectibles now, Elizabeth said.
"Being a child, she understands the situation, which I'm
grateful for," Elizabeth said. "Right now, our biggest priority
is to keep this home."
(Reporting by Soyoung Kim, editing by Maureen Bavdek)
((soyoung.kim@thomsonreuters.com; Reuters Messaging:
soyoung.kim.reuters.com@reuters.net; +1 313 967 1903))
Keywords: AUTOS/RETIREES

(C) Reuters 2009. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Reuters. Reuters and the Reuters
sphere logo are registered trademarks and trademarks of the Reuters group of
companies around the world.

nN26278363