GM and the UAW secured a controversial contract victory earlier this yearb based in large part on a promise to rank and file auto workers and retirees that their health care benefits would be secure for 80 years under a new entity called a Voluntary Employee Beneficiary Association, or a VEBA.

In a VEBA the employer agrees to put in sufficient assets, in cash and securities, to finance health care benefits for retirees. The liabilities associated with health care obligations are no longer on the books of the employer but stand in a separate trust managed by independent trustees who owe retirees a fiduciary duty. In the case of the GM/UAW VEBA, the trust is to be established by the UAW itself which will appoint its board of trustees.

But GM’s financial woes, including the announcement recently of a loss of more than $15 billion in the second quarter, will no doubt cause many UAW members and retirees to wonder if the VEBA will last 80 days much less 80 years.

Now Bloomberg is reporting that both the GM CFO and CEO have told Wall Street that the financial condition of GM is so dire that the VEBA itself may have to be reconsidered. So much for the assurances of the UAW leadership during the recent contract talks.

Technically the VEBA comes into existence after a federal court certifies that the new entity is in the interests of retired UAW members who are not able to influence or vote on actual contract terms as are working UAW members.  That court process is in its final stages. The court process has in and of itself been controversial because it is believed by many that the retiree plaintiffs are hand picked by the UAW itself and thus may not argue for retiree rights aggressively.

The GM and the UAW agreed that the company could stage its payments owed to the VEBA over several years. And now to bolster GM’s financial picture, the UAW agreed to a delay in the payment of $1.7 billion owed the VEBA, in essence loaning that amount back to GM. The UAW will, in theory, accrue interest payments on that loan.

But GM owes another $4.0 billion payment in 2010 and a third payment of $4.4 billion in 2012. No assurance has been given that those payments will in fact be made on time or at all. No doubt, the thousands of GM workers who were lured into early retirement after hearing the 80 year promise by UAW President Gettelfinger will be nervous that Gettelfinger was singing them a song.