By David Welch, BNS; The Detroit News ~ Oct 13, 2010

General Motors Co. received U.S. Labor Department approval for an agreement to fund its union-led retiree health-care trust with debt, common and preferred stock, and warrants in the new company.

GM agreed to contribute the securities to the fund, which will pay retirees’ medical benefits, in bankruptcy court in July 2009. The plan required government approval and an exemption to start the fund with more than 10 percent of its holdings in the company’s stock. The approval was published today in the U.S. Federal Register.

By waiving some of the limits on benefits trusts, the government was able to steer clear of having to bail out the fund, said David Whiston, an equity analyst with Chicago-based Morningstar Institutional Equity Research. GM put the assets in the trust last year with the expectation that the move would be approved.

The United Auto Workers Voluntary Employee Beneficiary Association is now clear to own stock equal to an 18 percent stake in the automaker and warrants for an additional 2.5 percent. The trust also gets $6.5 billion in preferred stock and a $2.5 billion note. The approval is retroactive to July 10, 2009, when GM emerged from bankruptcy and filed for government approval of the restructuring of its liabilities.

Noreen Pratscher, a GM spokeswoman, declined to comment on the approval.

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