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BREAKING: GM and UAW reach tentative agreement over new contract, bankruptcy looms regardless
by John Neff on May 21st 2009 at 1:58PM 
Though we were just warned that new deals between General Motors and the major auto unions in the U.S. and Canada were unlikely to be completed by their May 27 deadline, word has begun spreading that a tentative agreement has been reached between GM and the United Auto Workers union. While there's no word yet on a deal having been reached between GM and the Canadian Auto Workers union, the major obstacle of convincing the UAW to accept equity in the company in exchange for cash payments to its retiree health care fund appears to have been overcome, pending an official announcement from both parties and a vote by the UAW rank-and-file membership.
Like the deal recently reached by the union and bankrupt Chrysler, the UAW would get a 38% stake of GM for the purposes of funding its VEBA retiree health care trust. Also like its deal with Chrysler, the UAW presumably would not have a controlling interest in GM and sell off its stake as soon as the company was viable.
If true, only two major obstacles remain to avoid a bankruptcy filing before GM's government-imposed June 1 deadline. The first is getting CAW to follow the UAW's lead and sign a new agreement, and the second is to get the majority of GM bondholders to accept a debt-for-equity swap that would erase $27 billion of the automaker's debt but leave creditors with only a 10% stake in the company. The UAW would have its proposed 38% stake, common GM shareholders would hold a 1% stake and the U.S. government would have a majority stake of 51%. Its creditors, however, do not appear willing to accept GM's debt-for-equity offer as it stands, so unless a miracle happens in the next two weeks, a Chrysler-like Chapter 11 bankruptcy filing still appears the most likely result.
[Source: CNN Money, Photo by Bill Pugliano/Getty]
Reader Comments (Page 1 of 1)
Sea Urchin 2:11PM (5/21/2009)
How is this BREAKING, i knew about this HOURS ago.
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tommy 2:23PM (5/21/2009)
And the world revolves around just you RIGHT?
jrhmobile 2:22PM (5/21/2009)
So why didn't you share that with us hours ago, O Oracle of Obviousness ...
Sea Urchin 2:49PM (5/21/2009)
What Autoblog needs is an intern who does NOTHING but trolls the web, this way you'll guys always stay on top of the news.
I already troll on behave of myself, so i am not available.
mapoftazifosho 3:08PM (5/21/2009)
I have to agree with Sea Urchin...this was on Google news a little after noon...
jrhmobile 3:24PM (5/21/2009)
Yeah, but they posted this story at 1:58 and the AP didn't post it in its business feed before 1:30. That's what got me searching for more info before deadline. So the Urchin's assertion that it had it HOURS ago is pretty suspect. As in bogus. As in most of the ill-informed, self-aggrandizing cr@p it posts here trying to convince us how self-important it is.
Anyway, back to work with me. I've got one more deadline to meet this afternoon ...
Tony 2:33PM (5/21/2009)
Seems like closing the door after the horse is already out of the barn.
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jsb 2:37PM (5/21/2009)
GM needs the bankruptcy no matter what. How else are they going to void all the dealer franchise, and other, contracts without spending billions more that they don't have?
Just file Chapter 11 and let's move on!
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300C 2:35PM (5/21/2009)
Great picture, nice detail that the 3 vehicles pictured are GM vehicles looking at a clouded view of the HQ.
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In2uition 3:05PM (5/21/2009)
I was thinking the same thing.
HCL3 2:41PM (5/21/2009)
If GM management had any balls they would go ahead and file Ch. 11 in one of the districts that is really unfriendly to unions like Delaware or Virginia and break the back of the UAW once and for all. Trying to negotiate with these union goons is useless.
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arturo 2:42PM (5/21/2009)
So is there some business person that really knows what bankruptcy really is!
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Sea Urchin 2:52PM (5/21/2009)
Now I may have it wrong, but in BK secured creditors have the right to sell everything you have and get their money worth. I think the reason GM is avoiding BK is because if you sell all the assets, especially in this environment the creditors won’t be reimbursed fully by the time all assets and brands are sold.
Rob 3:14PM (5/21/2009)
"Its creditors, however, do not appear willing to accept GM's debt-for-equity offer as it stands, so unless a miracle happens in the next two weeks, a Chrysler-like Chapter 11 bankruptcy filing still appears the most likely result."
How about the Obama Administration holding a proverbial gun to the head of the bondholders and creditors like they tried at Chrysler? Let's just throw all this inconvenient contract law out the window and become a banana republic once and for all.
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Banan 5:00PM (5/21/2009)
the BIG 3 should drop that thief UAW which would help them bounce back up to where they were few years ago. Union = Bankruptcy
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RON 3:13PM (5/23/2009)
i just womder how hurtful unions were to gm while over the years they used profits made in the usa to invest in china. doesn't look like to to me that unions hurt that much.
James Raider 9:39PM (5/21/2009)
We are watching a slow death of an American industry. Its best days are unfortunately behind it.
http://pacificgatepost.blogspot.com/2009/05/detroit-icons-ending-more-than-era.html
Many of us are in mourning for era that won’t return.
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Christopher 3:57AM (5/22/2009)
this is true, the good ol U.S. of A. no longer has any real manufacturing sector. our domestic automakers have been the "last man standing" in this case, and are slowly, now perhaps quickly.. dying. this is what we get when 1) companies want to maximize profits by outsourcing everything to other countries at labor rates of fractions of a penny on the dollar(thus lining executive pockets) and 2) the vast majority of american citizens(figuring roughly 99.9% as the die hard "buy stuff made in america" crowd that pertains to more than just a car are quite few and far between) genuinely want foreign produced goods. cause it must be good if it comes from anywhere but here.
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knightuc1992 7:38AM (5/22/2009)
From the "This is a moot point" department...
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andyku 11:42PM (5/22/2009)
Why doesn't GM just do it the simple way. IOU to Union=20 billion. IOU to Bond holders=27 billion. IOU to taxpayers 15 billion. Add in a fudge factor of another 15 billion. This adds up to about 77 billion. Go bankrupt or do a prepackage reorganization or something with a different name. Union gets 20/77 of the stock, no cash. Bondholders get 27/77 of the stock and no cash. And taxpayers get 30/77 of the stock and no cash because we bailed them out. Now there is a GM with NO debit and I am sure we taxpayers can lend them another $15 billion if needed. You wind up with a GM with little debit, all new contracts at a competitive rate and $$$ back to us taxpayers for solving this mess.
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