UAW trust to get up to 20 percent of GM shares

May 26, 2009 2:39:21 PM PDT
General Motors Corp. will give the United Auto Workers union up to 20 percent of its common stock, $6.5 billion of preferred shares and a $2.5 billion note to fund a trust that will take over retiree health care costs starting next year. The union's trust will also get a seat on GM's new board of directors, although that seat will have to vote at the direction of the other independent directors.

The funding is part of a tentative agreement that union members will vote on this week as GM tries to pull together the remaining pieces that would allow it to restructure outside of bankruptcy.

Members of 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 into bankruptcy protection by Monday.

Plant-level union officials met in Detroit on Tuesday to hear details of the agreement that GM, the UAW and the government reached last week. Several local presidents said after the briefing that they voted unanimously to recommend that members approve the concessions.

Local union leaders said the 14 factories that GM intends to close were not identified in the agreement or by UAW international officials. 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.

The company did commit to reopening three closed assembly plants and one stamping factory if demand warrants, according to the summary sheet. The factories were not identified.

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 is forced into bankruptcy. Union members will vote on the concessions Wednesday and Thursday.

"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."

Green said it shows the union is working to help save GM.

"It's too bad everybody didn't, and that's talking about the bondholders," he said.

GM's bondholders have argued that the offer they've received gives them too small a stake for the amount they are owed.

GM wouldn't comment on whether it would file for bankruptcy shortly, but White House spokesman Robert Gibbs said it would go until the deadline.

"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.

GM had previously discussed in filings with the U.S. Securities and Exchange Commission that it was negotiating for a capital structure that included the government taking 50 percent of GM's shares in exchange for wiping out half of GM's debt as of June 1. Currentlyelphi Powertrain in Rochester, N.Y.; Delphi Powertrain Systems facilities in Rochester, N.Y., and 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 already has reached a deal with the union to cut labor costs, but GM's agreement has far steeper cuts. Ford officials have said they will seek further changes so that its deal with the union is similar to GM's agreement.

General Motors has been trying to overhaul its business so it can keep receiving federal money to stay afloat as it deals with soaring costs and slumping sales. On Friday, the Detroit automaker borrowed $4 billion more from the federal government on top of the $15.4 billion it has already received.

GM plans to announce the closing of 14 more factories as part of its previously announced effort to shutter 16 plants to trim production and cut costs. The moves will lay off 21,000 workers.

Two of the 16 closures have been announced previously: an engine plant in Massena, N.Y., and a parts stamping plant near Grand Rapids, Mich.

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General Motors Corp.: http://www.gm.com/


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