General Motors and the United Auto Workers union were reported to have made progress in concession talks while bondholders were offered proposals to slash GM’s debt on Monday, a day ahead of the automaker’s submission of a new survival plan to the US government.
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GM was seeking concessions from the UAW and creditors under the terms of its US$13.4bn federal bailout.
The automaker was not expected to reach detailed agreements by the deadline today (17 February) but talks with both key groups made progress in the final day, people briefed on the discussions told Reuters.
GM’s board convened via a conference call on Monday to review a draft of the document, which was also expected to detail plans for closing excess plants and disposing of laggard brands like Hummer, Saab and Saturn.
Facing the same Tuesday deadline, GM’s smaller rival Chrysler was locked in negotiations with the UAW on Monday and those talks were making progress after stalling at the weekend, people briefed on the talks told the news agency.
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By GlobalDataIn a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some $28bn in debt for equity in a document submitted to the automaker, a person with knowledge of those talks told Reuters.
But GM has not accepted those proposals, which were designed to discourage bondholders from dropping out of the deal in order to maximise its chances for success, the person added.
Reuters said the debt swap is a crucial element in the restructuring plan for GM, which has received $9.4bn in government aid. A White House aide told the news agency another $4bn would be released as planned on Tuesday ahead of the deadline.
Representative Thaddeus McCotter, a Michigan Republican, told Reuters progress in GM’s talks with its bondholders appeared to have spurred progress in its talks with the UAW, which is also being pressed to forgive debt.
“They will get this done,” said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate.
Representative Sander Levin, a Michigan Democrat, said the automakers remained focused on “how to make this work without bankruptcy.”
“We’ve looked at it hard and my personal opinion is bankruptcy would be a failure,” Levin told Reuters.
Meanwhile, European labour leaders have urged a spin-off of the Opel and Vauxhall brands rather than the deep cost cutting they said GM was seeking under the plan, internally dubbed GM’s ‘Renaissance’ project.
“The implementation of the ‘Renaissance’ project in Europe will ultimately lead to a collapse of Opel/Vauxhall,” they said in a statement. “This means scorched earth will be left in Europe with major conflicts all the way to the end.”
