United States District Judge Avern Cohn in Detroit has ruled that General Motors Co. is not required to pay $450 million to cover medical benefits for its retirees. The judge said that the current GM did not assume any obligation for the payment, since it was contracted by the old GM before it filed for bankruptcy in June 2009.
The payment had been part of a June 2007 contract between the old GM, Delphi Corp. and the UAW. But the payment was excluded in another contract over medical benefits inked in July 2009 by the new GM that emerged from Chapter 11. The UAW had claimed that the new GM owed the money by virtue of Delphi's own emergence from bankruptcy in October 2009.
Cohn, however, said the language of the 2009 contract was clear that GM did not owe the amount, adding that US Bankruptcy Judge Robert Gerber in New York, found the contract fair, reasonable and in retirees' best interests.
Cohn wrote in a 36-page decision that whether new GM has a moral obligation regarding the payment is another matter and not relevant.
"The UAW's efforts to turn the absence of language into language is reminiscent of the efforts to capture a 'will o' the wisp.'" Chapter 11 reorganizations can allow debtors to deny obligations predating their bankruptcy filings.