DETROIT — A cost-cutting deal between the United Auto Workers and General Motors Corp. will give a union-run health care trust fund a smaller stake in the automaker than previously expected, but it also could be the catalyst that allows the company to restructure outside of bankruptcy court.
GM, which faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 percent of the company’s shares while freezing wages and cutting performance bonuses and cost-of-living raises.
Factory-level union leaders from across the U.S. unanimously endorsed the deal at a meeting Tuesday in Detroit. The union’s GM workers must vote on the agreement by Thursday.
In a summary of the deal, the union said it would get 17.5 percent of GM’s common stock, plus a warrant for another 2.5 percent, as partial payment of the $20 billion that GM must put into a trust that will start paying retiree health care costs next year. The trust will get $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note. The remaining $10 billion will come from health care trust funds that GM already has set up. The trust will get a seat on GM’s board, although it will have to vote at the direction of GM’s other independent directors.
GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. Analysts say it’s unlikely enough bondholders will approve the offer, meaning GM would still be forced to file for Chapter 11.
But the UAW trust is getting far less than 39 percent in stock GM said it would get previously. With the UAW’s share at 20 percent, that frees 19 percent to go to either the government or the bondholders, who had until 11:59 p.m. Tuesday to accept or reject the exchange offer.
GM has said it could extend the deadline for the bond exchange and will decide that today.
by the assiated press
GM, which faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 percent of the company’s shares while freezing wages and cutting performance bonuses and cost-of-living raises.
Factory-level union leaders from across the U.S. unanimously endorsed the deal at a meeting Tuesday in Detroit. The union’s GM workers must vote on the agreement by Thursday.
In a summary of the deal, the union said it would get 17.5 percent of GM’s common stock, plus a warrant for another 2.5 percent, as partial payment of the $20 billion that GM must put into a trust that will start paying retiree health care costs next year. The trust will get $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note. The remaining $10 billion will come from health care trust funds that GM already has set up. The trust will get a seat on GM’s board, although it will have to vote at the direction of GM’s other independent directors.
GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. Analysts say it’s unlikely enough bondholders will approve the offer, meaning GM would still be forced to file for Chapter 11.
But the UAW trust is getting far less than 39 percent in stock GM said it would get previously. With the UAW’s share at 20 percent, that frees 19 percent to go to either the government or the bondholders, who had until 11:59 p.m. Tuesday to accept or reject the exchange offer.
GM has said it could extend the deadline for the bond exchange and will decide that today.
by the assiated press
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