Thursday, May 21, 2009

GM and UAW Reach Tentative Deal

The UAW and GM have reached a tentative agreement to cut costs and restructure payments to the healthcare fund, but a lot more needs to happen for the automaker to avoid bankruptcy.

Nick Bunkley of The New York Times reports:

The U.A.W. did not release details of the deal, which is subject to ratification by G.M. workers. The agreement is expected to be similar to one reached last month with Chrysler, which allowed that automaker to substitute equity for up to half of the $10 billion owed to its retiree health care fund. G.M. owes about twice that amount to the fund for its workers.

The deal is one of the government’s requirements for G.M. to win more loans but is not enough in itself to keep the carmaker from having to file for bankruptcy protection on June 1, the government’s deadline. More important, G.M. needs to persuade nearly all of the bondholders who hold more than $27 billion of its debt to swap their claims for stock in the restructured company. Most analysts expect the offer to fail.

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