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 has received $19.4 billion in government loans and 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 roughly 61,000 GM workers must vote on the agreement by Thursday.
In a summary of the deal obtained by The Associated Press, the union said it would get 17.5 percent of GM’s common stock, plus a warrant for an additional 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 also 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 also get a seat on GM’s board, although it will have to vote at the direction of GM’s other independent directors.
The UAW deal is another piece of GM’s quest to restructure out of bankruptcy. The Canadian Auto Workers union approved wage reductions and other concessions Monday. But 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 in stock than GM said it would get previously. The company disclosed in regulatory filings that it was negotiating to give the government half its shares, with the union trust getting 39 percent. The remaining 1 percent would go to existing shareholders. Upon approval of the exchange, GM would issue 62 billion new shares, then do a 1-for-100 reverse stock split.
But 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.
“It looks like the creditors will get a richer offer that hopefully will induce them to avoid a bankruptcy filing,” said Harlan Platt, a professor at Northeastern University in Boston who teaches corporate turnarounds.
GM has said it could extend the deadline for the bond exchange and will decide that Wednesday.
GM would not comment when asked if the offer could be sweetened. Previously the company has said the government was preventing it from offering bondholders more than 10 percent of the restructured company.
Factory-level union leaders said Tuesday that the 14 plants that GM intends to close were not identified in the agreement. Those are part of GM’s restructuring plan to be submitted to the government by a Monday deadline, said one of the officials, who spoke on condition of anonymity because the details of the meeting have not been presented to union members.
GM plans to close 14 more factories as part of its previously announced effort to shutter 16 plants, shedding 21,000 jobs. Two of the closures have been announced previously: an engine plant in Massena, N.Y., and a parts plant near Grand Rapids, Mich.
The company did commit to reopening three unidentified assembly plants and one stamping factory if demand warrants, according to the summary sheet.
Mike Green, president of a UAW local at a Cadillac factory in Lansing, Mich., said the leaders know it’s better to have an agreement in place in case GM enters bankruptcy.
“If you don’t ratify it, you go into bankruptcy court with nothing,” Green said. “If you go in with this, at least you have an agreement here. It’s a good-faith agreement.”
White House spokesman Robert Gibbs said GM likely will push the Monday deadline as it continues efforts to restructure out of court.
“We’ve got about a week to go. Obviously, a lot of the stakeholders are making sacrifices and I think this is a process that will continue, as it did in the Chrysler situation, right up against the deadline,” Gibbs said Tuesday.
The UAW also said in the summary of the deal that most of GM’s 61,000 hourly workers will get another buyout and early retirement package, this one sweeter than the most recent offers.
Production workers will be offered $20,000 plus a $25,000 car voucher for early retirement, while skilled trades workers will get $45,000 plus the voucher.
Buyout packages include $115,000 and the car voucher for employees with 20 or more years of service. Those with less than 10 years would get $45,000 and the car voucher.
The summary also says GM will take back five facilities from Delphi Corp., its former parts arm now in Chapter 11 bankruptcy protection.
GM will take ownership of Delphi Steering in Saginaw, Mich.; Delphi Thermal Systems in Lockport, N.Y.; Delphi Powertrain in Rochester, N.Y.; Delphi Powertrain Systems in Grand Rapids, Mich.; and Delphi Electronics and Safety in Kokomo, Ind.
Officials from UAW locals that represent Ford Motor Co. workers also attended Tuesday’s 2½-hour GM meeting to find out details of the concessions. Ford may seek a similar deal to GM’s.
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