Editor’s note: This is an updated version of a previously published story.

Negotiators for General Motors («www.businessweek.com») and the United Auto Workers union kept bargaining past midnight on Sept. 14, when the current contract expired, in hopes of reaching a new labor deal, say sources close to the talks.

Union locals were prepared to strike if a deal was not reached. But UAW President Ronald Gettelfinger decided to keep bargaining past midnight in search of a deal with GM. One source said talks would go “hour by hour” in search of a deal. Since the union selected GM as its target on Sept. 13, its labor pact could serve as a model for the deal the union will ink with Ford Motor («www.businessweek.com») and «investing.businessweek.com».

The biggest sticking point in this year’s important contract negotiations is GM’s wish to off-load its retiree health-care coverage into a union-managed health-care trust fund seeded by money and assets from GM. The deal would cut GM’s health-care costs and protect union retiree benefits if the company went bankrupt, but the two sides couldn’t agree on how much in assets GM would have to give the union.

Picking GM as the target shows the union is willing to manage its own health-care benefits. But throughout bargaining, GM has tried to get the union to take assets worth 50% to 60% of the company’s $65 billion in health-care liabilities while the UAW wants more than 70%, sources say.

“There is a second Rubicon that needs to be crossed,” says Harley Shaiken, a professor of labor economics at the University of California at Berkeley. “And that is how much is in the fund and how risky the assets are.” Nuts and Bolts

Here’s how the health-care trust would work. GM, Ford, and Chrysler collectively have about $112 billion in health-care liabilities. The union would assume those liabilities in exchange for a big chunk of cash, stocks, and other assets from the Big Three.

The union would take some amount, say $78 billion, or 70% of the total liabilities, in cash, stocks, and other assets, and invest those proceeds to grow the fund the same way a pension plan manages its assets. From the fund, they would pay out union members’ medical costs.

So long as the union can invest the funds at a rate higher than health-care cost inflation, the plan will work. That has historically been the case. Union pension plans earn about 16% annually, and GM’s health-care inflation has been about 8% to 10%.

“From my perspective, if the price is right, it would be beneficial to agree to the health-care fund,” says Jeff Manning, president of UAW Local 31 in Fairfax, Kan. “But I’d have to see what they’re willing to do.”

The two sides negotiated until 2 a.m. Friday morning, says a source close to talks. What’s In It for Involved Parties?

If a deal is made, GM and then, presumably, Ford and Chrysler, would strip most of the health-care liabilities from their books. The cash savings for GM would be roughly $700 million a year in the first year, and growing after that, according to a research report from JPMorgan («www.businessweek.com»).

What does the union get? In the long run, the UAW would get to control the protection of its benefits. If one of the Big Three were to fall into bankruptcy, the creditors get first crack at any cash, leaving retirees with no benefits, or very limited pension and health-care coverage.

But if the union takes the money now and sets up the health-care trust fund, they are covered in case of a bankruptcy. Shaiken says the union could even sell the deal to its members by saying they would be protected from someone such as Delphi («www.businessweek.com») Chairman «investing.businessweek.com», who took the parts company into bankruptcy and used the courts to demand steep concessions on wages and benefits from the union. Safety Funding

Another open question is how GM would come up with the $35 billion or more needed to seed the trust fund. The company has $23.6 billion in cash, but couldn’t use all of it for the fund. GM could include stock or some convertible debt, but all of that gives the union some risk in GM’s stock performance.

“The possibility of health-care costs going through the roof and the stock market going through the floor would create huge problems,” Shaiken says.

That’s why the union is looking for GM and the other automakers to provide some safety funding later on if the investments go sour. The union may also want some guarantees that certain plants will remain open in the U.S. “The UAW doesn’t want to be in the position of funding the development of new plants in India and China with concessions,” Shaiken says.

In another indicator that UAW President Gettelfinger is willing to manage health-care plans, sources close to the talks say the union has started looking at different firms that could administer the health-care benefits and others that would invest the assets. Strike Out?

At midnight Sept. 14, union leaders were waiting to hear from top negotiators about a possible walkout. They could still strike if Gettelfinger feels they are at an impasse.

A long-term strike would be devastating for GM, analysts say. But a short one lasting just a few days could be just disruptive enough to get Gettelfinger a deal he can sell to his members, Shaiken says, but without causing serious financial damage to the carmaker. He added: “Some think a strike is not even possible. It may be unlikely, but it could happen.”

HEALTH chiefs want public cash to be spent on building a new Sick Kids hospital in Edinburgh following the controversy over the Royal Infirmary’s private funding.

NHS Lothian has spent the past few months drawing up detailed plans for the new hospital, which is due to move from its existing Victorian base to a purpose-built home at Little France within five years. The outline business case for the hospital is due to be submitted to the Scottish Government by the end of the year.

NHS Lothian is required to investigate different sources of funding, including the controversial Private Finance Initiative (PFI) system used for the ERI.

However, parents are strongly opposed to this, while the SNP government also hopes to “crowd out” the number of PFI projects over time.

It is understood health chiefs also want to fund the Sick Kids through public money.

Initial estimates put the cost of moving to Little France at 60 million in 2005-6 prices, with around 23m generated by the sale of the Sciennes site.

Jackie Sansbury, NHS Lothian’s director of strategic planning, said: “NHS Lothian is working in partnership with patients, their families and carers as well as the clinical staff in developing the new hospital for children and young people.

“One of the main themes to emerge from our consultation work over the last two years is that parents want to know about the method that will be used to finance the new hospital. They don’t want private finance being used but would prefer a publicly-funded hospital owned by the NHS.”

Youngsters, parents and members of the public have all been involved in shaping the designs.

There are likely to be a large number of single rooms - to comply with new national guidance - however, traditional wards will also be created after youngsters said they liked to have company.

The new hospital will also cater for 14-to-16-year-olds for the first time, with a special adolescent unit - complete with a chill-out zone - to be created. Youngsters aged 16 to 18 will have the choice of being treated at the Sick Kids or the neighbouring ERI.

Other details set to be incorporated in the plans include landscaped gardens, access to computers for e-mail, and “hotel” accommodation for parents.

The Royal Hospital for Sick Children has been based in its existing dilapidated buildings in Sciennes since 1895. Little France has always been the favoured site for any new hospital because the ERI and Simpsons Maternity Unit are based there.

Isabel McCallum, clinical director of the Sick Kids reprovision project, said: “The feedback is proving invaluable in shaping the emerging vision of what a new hospital for children and young people should be providing after 2012, our planned opening date.

“Our plans include setting up specific adolescent facilities, which may also have quiet spaces away from the bustle of a ward.

“Access to the outdoors and having lots of natural light has also emerged as a priority, as has providing somewhere comfortable for parents to stay, or go when children are in hospital.

“We are currently planning for the new hospital to have at least half of its beds in single rooms, with the remainder in flexible areas. People are telling us they like ward spaces.”

Related topic

- «news.scotsman.com»
http://news.scotsman.com/topics.cfm?tid=266

The wealth of the world’s super-rich soared last year at the fastest rate for seven years. The rise in riches was accompanied by a surge in charitable giving to $285bn - believed to be a record.

The downside for the super-rich was that the cost of their favourite luxury products and activities rose at nearly twice the average rate for goods and services.

The 11th annual study of 71 countries by investment bank Merrill Lynch and consultancy firm, Capgemini found that buoyant economic growth across the world pushed the riches of “high net worth individuals” (HNWI) up by a hefty 11.4% last year. The dramatic increase took the total prosperity of the world to $37.2 trillion - equivalent to 15 times the annual output of the UK economy.

High-net worth individuals are those with $1m (500,000) to invest in financial assets excluding first homes. Ultra high-net worth individuals have $30m at their disposal.

Britain had the fourth biggest number of the world’s wealthiest, with a total of 484,580 high-net worth individuals, up 8.1% from 2005. Only the US, Japan and Germany have more. Britain is home to 16.7% of Europe’s super-rich.

Part of the rise in world wealth last year came from booming stock markets. The Dow Jones world index, for example, increased by a solid 16.4%.

The boost in cash held by the world’s millionaires and billionaires gave way to a surge in philanthropy, the report said. Rich individuals donated 7% of their wealth to charity, while the ultra-rich donated more than 10% to these causes. This charitable giving amounted to more than $285bn globally.

Warren Buffett, the world’s second-richest man, added to the trend last year when he donated 85% of the $45bn earned from his lifetime of investments to a foundation established by Microsoft’s Bill Gates and his wife Melinda.

“Philanthropy is central to what wealth managers are having to do; it cannot be ignored,” said Nick Tucker, a Merrill Lynch executive director and co-author of the report. “New wealth especially are keen on this.”

Environmental and socially responsible investing were no longer niche categories. Nearly half of all British investment firms invest more than 10% of the assets under their management in socially responsible projects, a rise of 20% from 2004.

The report predicted that global wealth was expected to grow by 6.8% each year until 2011, pushing the total amount to $51.6 trillion, though Mr Tucker warned that a slowing world economy may put a brake on the soaring expansion of wealth over the coming years.

“With many central banks tightening monetary policy, the period of high liquidity that has stimulated recent growth may soon come to an end. The growth rates of Asia and Latin America are expected to ease back as global demand slows. The dual risks of rising energy prices and geopolitical conflicts are a continued threat, adding a level of uncertainty to our current forecasts.”

Britain in particular was facing slowing growth, and therefore a lower generation of wealth, as a result of higher inflation and low household savings rates this year.

There were 9.5 million HNWIs last year, according to the report - a rise of 8.3% from 2005. Europe saw its wealth increase at the sharpest rate since 2000, with a rise of 7.8% to $10 trillion. The performance of financial markets in eastern Europe in particular was a key driver in this, Mr Tucker said. Ultra-HNWIs also rapidly increased by 11.3% to 94,970 last year.

The largest share of the growth in the world’s higher net worth population came from Singapore and India, where numbers rose by 21.2% and 20.5% on the year respectively. This continued the rise of a new elite of super-rich individuals in developing nations as their economies expanded, in the case of India and China at rates more than triple that of the UK.

Many of these emerging economies, which included Russia, were gaining strength from domestic private consumption, competitive services and manufacturing sectors.

Wealth generated in Latin America, the Middle East and Russia was buoyed up by high commodity and oil prices.

“The globalisation of wealth creation has accelerated,” said Chris Gant, head of wealth management at Capgemini Financial Services. “If 2005 was characterised by a flow of investment to international funds from HNWIs, 2006 ushered in a new era whereby emerging economies leaped ahead with direct foreign investment, strong domestic demand and hefty stock market gains.”

The report found that as the rich got richer, the demand for luxury products increased, making them more expensive. The Cost of Living Extremely Well Index (CLEWI) measured the cost of a basket of 42 luxury goods and services, including designer handbags, tuition at Harvard University and filet mignon.

Last year, this index rose nearly twice as fast as the cost of everyday consumer products. The CLEWI rose at 7% while the consumer price index increased by 4%.

The world’s millionaires nevertheless devoted about a quarter of their “investments of passion” to yachts and private jets, dubbed “mobile mansions,” and a fifth to art.

The report said more investors were moving their money out of the US to Europe and to a lesser extent Asia. This was likely to be because of signs of a slowdown in the US economy. The study found investment in property showed a large rise thanks to spiralling prices.