DETROIT – General Motors Corp. and the United Auto Workers reached an accord to reduce retiree health-care obligations and labor costs, clearing a major hurdle in the car maker’s expected plan to rush through bankruptcy court in as little as 30 days.
GM sought a UAW deal to cut by at least half the $20 billion in cash it owes for retiree health care, and shave at least $1 billion off annual hourly labor costs that reached $8 billion in 2008, The Wall Street Journal reported.
Details of the agreement weren’t disclosed as the union wants to first present the pact to 60,000 GM workers starting Tuesday. About one-third of those employees will lose their jobs under GM’s restructuring plan.
While GM faces a June 1 deadline from the U.S. Treasury to restructure out of court, company executives are aiming to file for bankruptcy by the deadline because they have been unable to reach a debt-for-equity agreement with bondholders, which the Treasury has mandated, said three people working on the plan. GM said in February it will need billions more in debtor-in-possession financing in order to survive bankruptcy and that the funding is expected to come from the Treasury Department.
People familiar with the UAW agreement said it largely mirrors concessions the UAW granted Chrysler LLC last month, including a suspension of cost-of-living allowances, bonuses and some holidays.
The deal also calls for further consolidation of job classifications, which will save GM money because workers will be able to handle a wider variety of tasks. Wages are expected to remain unchanged. The agreement also includes a provision for future job buyouts, as well as to forbid strikes until 2015, these people said.
In exchange for receiving the right to use stock instead of cash to fund half the $20 billion it owes a retiree health-care trust, GM offered the UAW 39% of the company’s equity and representation on its board.
A UAW spokesman didn’t return phone calls seeking comment.
Meanwhile, GM executives aim to wrap up the reorganization and get the company out of court by as soon as the last week of June, the three people working on the plan said.
By lining up a new labor pact ahead of a filing, GM can walk into bankruptcy court armed with the backing of one of the most critical claimants on the company.
In 2005, GM’s former parts subsidiary, Delphi Corp., filed for bankruptcy and attempted to rewrite contract terms without labor’s backing. UAW resistance led to messy court battles and a costly delay to the proceedings. Delphi has yet to emerge from bankruptcy.
The drive for an expedited bankruptcy could be challenged by GM’s investors and dealers, who are expected to argue to a judge that they are being treated unfairly.
The deal is the latest concession by the UAW after several years of cutbacks. Unlike past negotiations, which often dragged on for months and went past deadlines, the parties — under pressure from the Treasury, which has lent GM $15.4 billion — moved quickly to revise a contract approved in 2007.
“Reality is staring in everyone’s faces and the entity that is making sure that everyone does not miss this story line is the U.S. Treasury,” said Donald Schroeder, a bankruptcy attorney with Mintz Levin in Boston. “It’s been very transparent as a result of the government oversight.”
UAW officials from across the U.S. will gather Tuesday in Detroit to review the agreement.
Although a deal was expected, tensions between the UAW and GM heightened in recent days over the company’s plan to import more vehicles, including its first imports from China in 2011. UAW President Ron Gettelfinger has been an outspoken critic of efforts by U.S. auto companies to boost imports.
Gettelfinger has managed to secure several promises from GM, Chrysler and Ford Motor Co. to assign specific models to U.S. assembly plants stretching into the next decade. The UAW already has inked new cost-cutting labor agreements with Chrysler and Ford.
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