Memorandum of Understanding

Exhibit 10.1

MEMORANDUM OF UNDERSTANDING

October 29, 2005

      During the course of the past several months, General Motors and the UAW have discussed at length GM’s deteriorating financial situation, including its spiraling health care costs and competitive challenges. In conjunction with these discussions, GM has provided the UAW with extensive access to GM’s financial records and the UAW has conducted a thorough review of GM’s financial position. As a result of the discussions the parties agree to the following, subject to ratification:

Affordability

      Retirees and surviving spouses who meet the following two-part test will continue to be covered by the current Health Care Program for Hourly Employees (“the Plan”), except the responsibility for the dental plan will be moved to the Defined Contribution VEBA (DC VEBA), and those changes referred to in Attachment C will apply:

Amended Plan

Eligibility and Coverage

      Coverage for active employees, current and future retired employees, surviving spouses and dependents will be provided in accordance with existing eligibility rules. References in this Memorandum of Understanding (MOU) to retirees, Retired Participants, or similar wording is intended to include current and future retirees, surviving spouses, and their eligible dependents unless the context indicates otherwise.

Opting In and/or Out

      Retired participants who decline coverage under the Plan as amended herein (“Amended Plan”), will be automatically covered by a catastrophic plan as set forth in Attachment A. Retired participants will be allowed to elect between the Amended Plan and the catastrophic plan only during an annual enrollment period.

      Retired participants who fail to initially enroll in the Amended Plan will be allowed to enroll in the Amended Plan at any time during the first six months following the effective date.

Amended Plan Structure

      The Amended Plan will be the 2003-2007 defined benefit plan (i.e., the current Plan), with only the following modifications:

Defined Contribution VEBA Administration

      A new VEBA trust (the “Defined Contribution VEBA” or “DC VEBA”) will be established. It will be administered by an independent trust committee (the “Committee”) which shall not include any GM representatives. GM will fully cooperate with the DC VEBA by, for example, either accepting direct monthly payments from the DC VEBA or directing monthly payments to carriers for mitigation amounts and by providing sufficient information regarding the contribution obligations to allow the DC VEBA to faithfully evaluate and enforce the contribution obligations.

Purpose

      The purpose of the DC VEBA will be to reduce or reimburse monthly contributions, deductibles, out-of-pocket maximums, and/or co-insurance payable by retired participants, and/or to pay or reimburse costs related to dental coverage for retired participants.

DC VEBA Funding

      Contributions and/or asset transfers to the DC VEBA will be made as follows upon the entry of Judgment approving this agreement:

DC VEBA Profit Sharing Payments

      For the Plan Years 2006 through 2012 (which is a time period equivalent in length to the seven year period of prior service cost amortization associated with the Amended Plan changes set forth in this agreement), in determining the “Profit Sharing Amount” as defined in Article II, Section 2.13 of the Profit Sharing Plan, the impact on profits associated with the changes (as described in Attachment D) to the Plan

that are implemented pursuant to this agreement will be excluded from the calculation of “Profits.” An amount equal to the resulting reduction in the Profit Sharing Amounts otherwise payable, will be contributed by GM to the DC VEBA. If the amount payable to the DC VEBA under this paragraph is less than thirty million dollars ($30,000,000), an incremental amount totaling the difference between thirty million dollars ($30,000,000) and the amount payable to the DC VEBA under this paragraph will be calculated. The cumulative (if multiple years) incremental amount plus interest will be contributed to the DC VEBA in the earlier of (a) the next plan year in which profit sharing is contributed to the DC VEBA, or (b) the 2013 Plan Year. The interest will be calculated at the OPEB discount rate in effect for the year (or years, if the incremental amount were not paid for multiple years) immediately prior to the incremental contribution.

DC VEBA Wage Deferral Payments

      Contributions equivalent to one dollar ($1.00) per hour in wage deferrals and COLA diversions will be made to the DC VEBA which will consist of the following:

      Finally, the current COLA diversion will be increased by an additional two cents ($0.02) beginning with the quarterly COLA adjustment following the quarter in which the above referenced cumulative total of seventeen cents ($0.17) has been diverted, and for each subsequent quarter.

      Contributions based on these wage deferrals, additional COLA diversions and COLA-equivalent deferrals will be calculated on the basis of the then current total amount of the deferrals multiplied by every hour worked times a factor of 1.5 in order to reflect the value of wage-related costs including pay for time not worked, overtime premiums, shift premiums, etc., that would otherwise have been incurred by GM had such amounts not been deferred. Such contributions will be made on a quarterly basis, in arrears.

      In the event that the court does not enter the Judgment approving the agreement, or such judgment is overturned in whole or in part on appeal, GM will cease any additional contributions provided for under the preceding paragraphs and prospectively reinstate the base hourly wage rates and COLA deferrals.

DC VEBA Stock Appreciation Rights (SAR)

      Following entry of Judgment approving this agreement, GM will make three cash contributions to the DC VEBA based on the increase in the notional value of eight (8) million shares of GM Common Stock, with one third of the number of shares applied to each contribution. GM will contribute to the DC VEBA the value of any appreciation in the share price over the average share price for the week ending October 14, 2005 (“Base Value”). One-third of the shares become available for generating the contribution amount on the Judgment date, one third on the first anniversary date of the Judgment, and the final third on the second anniversary of the Judgment. All three grants expire three years from the Judgment; the grants, or any portion thereof, may be exercised by the Committee at any time following the date they become available and prior to expiration. The exercise price will be based on the average share price one week prior to the exercise date. Once exercised by the Committee, the shares have no additional future value. The contribution will be based on the difference between the exercise price and the Base Value times the number of shares per issue. No contribution will be made if the exercise price on the exercise date is lower than the Base Value on the effective date of the agreement. Final documentation will include a provision for adjustment of the Base Value and/or notional shares (i.e., the eight [8] million notional shares, or to the extent notional shares have been exercised, the balance of non-exercised notional shares outstanding), as appropriate, in the event of stock

splits, reverse splits, exchange offers, stock buybacks, asset spinoffs, or other transactions on the same basis as that provided to those covered under the then current GM Stock Incentive Program. In no event shall a single transaction result in both a SAR’s related cash distribution under the DC VEBA Stock Dividend Payment paragraph below and an adjustment of the Base Value and/or notional shares as described above. In the event the Judgment approving this agreement is reversed or materially altered in whole or in part, there will be no obligation to make a SAR contribution under this paragraph.

DC VEBA Stock Dividend Payments

      Following entry of the Judgment approving this agreement, as GM implements its turnaround plan and performance improves, if through September 14, 2011, GM raises its regular quarterly cash dividend above $.50 per share, GM will place on a one time basis, an amount equivalent to four quarters of such dividend increase in the DC VEBA. In the event that GM declares any distribution, other than a regular quarterly cash dividend, to be paid to all shareholders of record, at any time after October 17, 2005, but prior to the expiration of the Stock Appreciation Rights as defined above, an equivalent per share cash contribution to the DC VEBA will be made at that time based upon the number of non-exercised SAR shares as identified above, i.e., eight (8) million shares less any exercised SAR shares. If the obligation in the preceding sentence arises prior to the establishment of the DC VEBA, GM shall make the contribution (with interest) as soon as practicable after the DC VEBA is established. In the event the Judgment approving this agreement is reversed or materially altered in whole or in part, there will be no obligation to make a stock dividend contribution under this paragraph.

Terms of DC VEBA

      The Trust Agreement governing the DC VEBA will contain provisions which direct that if there is a termination of this agreement, the assets of the DC VEBA will be utilized as soon as reasonably practicable to reimburse GM for the cost of providing health care for hourly retirees and beneficiaries in an amount equal to a pro rata share of the DC VEBA assets plus any earnings on the pro rata share. For purposes of this paragraph, the pro rata share will be determined by dividing the GM Amounts contributed/transferred to the DC VEBA by all amounts contributed/transferred to the DC VEBA. The GM Amounts are equal to the sum of the amounts GM has caused to be transferred or contributed to the DC VEBA under a) above, d) above — Stock Appreciation Rights, e) above — Stock Dividend Payments, and the payment of the incremental amount resulting from the $30 million guarantee under the Profit Sharing provisions described under b) above.

Plan Administration Costs

      GM and the UAW will continue to work with third party benefit administrators and other parties responsible for benefit plan administration to reduce administrative costs.

Effect of Legislative Changes

      The impact of legislation on the Health Care Program cannot be predicted with any certainty. Because these matters are unsettled, in the event any legislation has the effect of reducing retiree health care costs, GM and the UAW agree to discuss the impact of such legislation on this agreement at that time in order to equitably address any resulting financial benefit.

Fees

      The UAW will apply to the court for reimbursement of reasonable attorney and professional fees (not to include any success fee, completion bonus or rate premiums) payable by the UAW in connection with the court proceedings to obtain the Judgment approving this agreement and approval for the payment of certain professional fees associated with the settlement process.

Indemnification

      The parties will seek court approval of a mutually agreeable indemnity provision whereby GM agrees to indemnify the UAW from liability incurred as a result of the UAW’s entering into, or participation in the discussions regarding this agreement.

Effective Date

      Implementation of the matters set forth in Attachment C (the “Administrative Changes”) will take place in accordance with the provisions of Attachment C. Other than those changes described in Attachment C which will occur following ratification, adoption of the Amended Plan will take place as soon as practicable after entry of Judgment approving the agreement by the United States District Court in Detroit. The parties will jointly work diligently to have this agreement approved by the Federal District Court in Detroit by April 1, 2006. Except for the Administrative Changes, the Plan will continue to operate without modification until entry of Judgment approving this agreement or termination of this agreement.

Legal Judgment

      There is currently a dispute between GM and the UAW regarding whether GM can unilaterally modify benefits provided by the Plan or whether such benefits are vested with respect to retired participants. A declaratory judgment action has been filed by the UAW and retirees in the federal District Court in Detroit regarding this dispute. GM and the UAW in such proceeding will seek a judgment from the Federal District Court approving a class-wide settlement which (a) incorporates this agreement, and (b) is applicable to all retired participants, GM and the UAW (the “Judgment”).

Duration and Termination

      This agreement will remain in effect unless and until terminated in accordance with this section.

      Termination of the agreement may occur as a result of litigation-related events as follows:

      If the agreement does not terminate in accordance with 1 or 2 above, the agreement and the Amended Plan will remain in effect until at least September 14, 2011. The agreement and the Amended Plan will continue in effect indefinitely after September 14, 2011, including but not limited to the inflation protection provided by the ongoing annual increase not to exceed 3% in enrollee cost share, provided that GM or the UAW may declare a termination, by providing 90 days written notice to the other party. In the event that either party declares a termination, both parties will remain protected by the “no prejudice” provision described below.

      Termination of the agreement and/or the Amended Plan under any of the methods described above shall not modify or terminate the “No Prejudice” agreement.

No Prejudice

      This agreement, and anything occurring in connection with reaching this agreement, are without prejudice to GM, the UAW and the retirees. The parties may use this agreement to assist in securing the Judgment approving the settlement and to implement the Administrative Changes in accordance with Attachment C. It is intended that neither party nor the retirees may use this agreement, or anything occurring in connection with reaching this agreement, as evidence against GM, the UAW or the retirees in any circumstance except where the parties are operating under or enforcing the settlement incorporating this agreement or the Judgment approving the settlement. The settlement agreement, and the Judgment approving the settlement, will include a clear and unequivocal “no prejudice” provision making clear that, except where

the parties are operating under or enforcing the settlement incorporating this agreement or the Judgment approving the settlement, neither this agreement nor anything occurring in connection with reaching this agreement will prejudice any right of the UAW, the retirees, or GM on any issue, including but not limited to the issue described under the Legal Judgment paragraph above, except that in the event the Amended Plan becomes effective following court approval and the Amended Plan is later terminated in accordance with termination provisions of this agreement, neither the retirees nor the UAW would retain the right to seek reimbursement or recovery in connection with the health care changes incorporated in this agreement and Amended Plan for the period prior to termination.

      The “no prejudice” provision will include the understanding that in the event the court enters the Judgment, but this agreement is thereafter terminated by GM, the case law as it exists on the date of Judgment will be treated as the applicable body of case law for determining the legal issue described in the Legal Judgment paragraph above in litigation between GM, the UAW and current retirees, subject to any and all changes in the applicable law from subsequent legislative, regulatory or administrative developments, and provided further that GM may make any and all arguments in such litigation as are available to it regarding such case law as of the date of Judgment.

Final Documents

      All matters set forth in this agreement are subject to full legal documentation satisfactory to the parties consistent with the provisions set forth in this agreement.

Health Care Reform

      GM will publicly support federal policies to improve the quality and affordability of health care, and work cooperatively with the UAW towards that goal. See Attachment E.

Capital Spending

      During these discussions, the Corporation affirmed its intent to reinvest in its core automobile business through capital spending programs. In that regard, General Motors, on average, has spent $3.9 billion per year for Portfolio Initiatives over the most recent 6 year period of time and $1.2 Billion for Non-Portfolio Initiatives during that same time period. Future capital spending is forecasted to include, on average, $4.6 Billion for Portfolio Initiatives over the next 6 year period of time and $1.0 Billion for Non-Portfolio Initiatives during that same time period. This results in a projected annual capital spending of $5.6 Billion for GMNA. The parties’ efforts during these recent health care discussions enhance the ability of GMNA to attain these projected capital spending levels. As business conditions change and modifications are made to the capital spending programs, advanced dialogue with the UAW will occur. The General Motors capital spending programs will be reviewed at least annually, or upon request, with the UAW.

Agreement dated                                              , 2005

Attachment A

Group Catastrophic Plan

      This option will be a single catastrophic TCN plan offering which will consist, in general, of the following:

Attachment B

Plan Design Escalation

Note: All dollar-denominated plan design items affecting enrollee cost share, i.e., drug co-payments, TCN and PPO deductibles, out-of-pocket maximums, emergency room co-payments, and contributions will increase annually as measured against the total annual aggregate medical trend in the overall plan for each respective year at a rate not to exceed 3% and rounded to the nearest whole dollar.

Attachment C

Health Care Program Modifications

(Effective As Noted in Each Item Listed Below)

(Applicable to All Active Employees, Current and Future Retirees,

Surviving Spouses, and Dependents, Unless Otherwise Specified)

Coordination With Medicare

Hospital/Surgical/Medical Modifications — TCN and PPO, Unless Otherwise Specified

      1. “Cosmetic” Provisions — Eliminate coverage for inpatient and outpatient hospital services (e.g., room & board, lab, x-rays, etc.) provided in conjunction with non-covered “plastic, cosmetic and reconstructive” surgeries.

      2. Referral Process for the “Preferred Provider Organization” Option

      3. Integrated Care Management Program: — The parties agreed, during 2003 bargaining, to conduct a study of integrated care management. The Request For Proposal (RFP) will be released during the fourth quarter of 2005. The assessment of the RFP responses will be completed during the first quarter of 2006. The new Integrated Care Management Program will be implemented as soon as practicable upon completion of the study. The program will include, at a minimum, the following: Inpatient & Outpatient “Prospective” Pre-certification, as appropriate; Disease Management Programs, Centers of Excellence Programs and a LifeSteps Health Risk Assessment tool. Further, the parties agree to include a limited office visit benefit, similar to that currently included in the Coordinated Care Management (CCM) program. The parties agree to restrict the availability of the office visit benefits and will mutually define criteria to determine who is eligible to receive such benefits. However, the parties further agree that the value of this office visit benefit will not deteriorate from what is currently available under CCM.

      4. Hold Harmless — Except as otherwise provided in Section 4 of the Miscellaneous Letter entitled Understandings With Respect To Health Care-General, when an enrollee receives services from a physician who is not participating in Blue Cross Blue Shield (BCBS) or United Health Care (UHC) networks or from a facility not participating in a UHC network, the Program will be responsible to pay only up to the reasonable and customary (R&C) level as determined by the carrier. The enrollee will be responsible for all fees charged above R&C, unless the enrollee is in a situation in which the enrollee does not have the ability or control to select a par provider to perform the service. Such amounts over R&C are considered “Other Amounts Not Covered” by the Health Care Program and therefore will be the responsibility of the enrollee and will not be applied towards enrollee cost-sharing.

Prescription Drug Tools and Other Modifications

      In mid-year 2005, the parties jointly hired an independent consultant with the goal of reviewing various Rx Tools and with the intent the parties implement, as soon as practicable, such Rx Tools following review and recommendation by the consultant and as has been mutually agreed by the parties. These Rx Tools will be implemented in TCN, PPO and the parties will recommend that HMO plans implement the recommended Rx Tools as agreed upon.

      1. Those tools specifically reviewed by the consultant and agreed upon by the parties include:

      2. The Rx Tools Consultant will continue to evaluate specific medications, tools and other opportunities to improve the performance of the National Managed Pharmacy Program, as directed by the parties. Implementation will only be by mutual agreement. Such tools will include, but not be limited to, the following:

      3. RationalMed on a Nationwide Basis — Implement this program which identifies patients at risk for possible adverse Rx treatment outcomes and communicates the potential risks to treating physicians and provides information to support therapy decisions.

      4. Maintenance Drug List (MDL) — Add all maintenance drugs, as proposed, in Exhibit 1 to Attachment C.

      5. Quarterly Mailing of Prescription Drug Explanation of Benefits (EOBs) — Eliminate mailing of EOBs. EOBs will be available upon request to the carrier, via the carrier website or when an adverse determination is made.

      6. Edits for Select Drugs in TCN, PPO and HMOs — Implement Prior Authorization for Revatio to provide approval only for treatment of Pulmonary Arterial Hypertension (PAH) and exclude Dapoxetine from Program coverage.

      7. Pharmacy Benefit Manager — Complete an evaluation of the current (and potential) pharmacy benefit manager in line with the CUCHCB letter. As well, the parties agree to evaluate, as part of this process, Specialty Pharmacies.

Health Maintenance Organization (HMO) Benefit Design and Administration — Effective as soon as practicable after approval by the Federal District Court, the HMO plan design will be as follows:

      During these negotiations, the parties discussed a number of approaches that might possibly be followed in applying the agreed-to health care savings associated with the Traditional Care Network (TCN) to the HMO environment, where the opportunity to implement parallel changes in plan design is not always possible. The parties agree that the goal of achieving an equivalent amount of health care savings from HMO plans would likely require some combination of the following: an increase in the existing office visit co-payment; additional monthly contributions; and other potential changes. The parties further agree that determining the appropriate mix and structure of such changes requires further analysis and study. As a result, the equivalent value of the TCN-related changes (i.e., those related to deductibles and out of pocket maximums) will not be applied to the existing HMO structure prior to January 1, 2007.

Exhibit 1 to Attachment C

Additions to MDL

Attachment D

10-14-05 Framework Plan Change Effect on Hourly Expense

Projected at Valuation Trend Basis 2006-2011

Discount Rate = 5.75%

(Assumes Plan Change as of 10/1/2005; i.e., no impact on 2005 Expense;

100% savings in 2006 expense; Excludes Impact of VEBA Contributions)

Attachment E

Health Care Reform Letter

      A prominent theme throughout the parties’ current discussions has been the unsustainable trend of rising health care costs. The resulting economic burden has not only impaired the Corporation’s competitiveness and employees’ job security but also has imperiled workers, families and communities throughout the country.

      Over the years, the parties have worked together to improve various aspects of the health care system, including accreditation standards for Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), clinical quality standards, Certificate of Need policies and Electronic Health Records. Cost trends however continue to rise.

      Given the fragmented and wasteful nature of the U.S. health care system, the parties recognize an issue-by-issue approach to reform — while necessary — is no longer sufficient in meeting the needs of purchasers, payers, consumers, and patients. The parties agree that a lasting solution to our health care cost crisis cannot be forged at the bargaining table.

      Many developed countries have addressed the health care problem by requiring broad-based financing, cost-effective delivery and simple, universal administration. In Canada, many companies have gained a substantial competitive advantage relative to U.S. labor costs because of such a national health care system. Here at home government must be more aggressive in leveling the playing field so American businesses and workers can be as competitive as possible.

      To this end, the parties will engage in an unprecedented effort to enact policies to improve the quality of health care and to make it more affordable, accessible and accountable on a comprehensive, national basis. As examples of such an approach, the parties agree to pursue the following efforts:

      National Health Care Reform: The parties will develop and/or support national proposals that, in whole or part, reinforce risk-pooling, streamline administration, assure access and foster cost-effective, quality health care.

      Reinsurance or Stop Loss Coverage: Catastrophic costs pose a special burden on all payers. The financial risks underlying such cases are best shared across the population at large. Therefore, the parties will support federal efforts to address these high-cost cases and thereby level the competitive playing field.

      Prescription Drug Initiatives: Given the growing importance of prescription drugs in medical treatments, it’s imperative to ensure safety and cost effectiveness in the purchase and utilization of prescription drugs. To this end, the parties will aggressively advocate for and promote pharmaceutical safety and cost containment policies that include the following:

      Technology Evaluation: While policy analysts debate the details, almost all agree that technology is the number one health care cost driver. However, payers and purchasers frequently lack the necessary information to assess the relative clinical and economic value of new and emerging technologies. Therefore, the parties will support increased funding for technology assessment, including reestablishment of the Office of Technology Assessment or a similar, independent body.

      Universal Coverage: Given the Nation’s 46 million uninsured Americans, the UAW and GM will support public policies at the federal and state level that will enable all Americans to have health insurance.

      The parties agree that the stakes are now so high that reforms are needed at the national and state levels. Preconceptions should be discarded and mutual efforts should be pursued in a spirit of pragmatism. The parties recognize that the task is fraught with difficulty and that we may fail. If we do nothing however, failure is guaranteed.

      The UAW and GM will form coalitions with other stakeholders, including other employers and unions, senior and consumer groups, hospitals, doctors, insurers, state and local governments and policymakers interested in improving quality and reducing costs. The UAW and GM will encourage support for these national solutions to address health care quality and cost.