Wednesday, May 27, 2009

Lack of Creditor Deal Portends Chapter 11 Filing

I'm still trying to comprehend the details of the deal reached between GM and the UAW. Officially, it's a restructuring of the 2007 collective bargaining agreement, but to make the deal work, the government had to put billions worth of sweetening on the table. The UAW keeps their base wage, keeps their pension, gives in some on healthcare, and gives in a lot on work rules. An increased government cash outlay makes the GM healthcare and pension less at the mercy of future GM stock valuations, and in return, the government will own as much as 80% of the stock of the corporation. There will be cutbacks in plants, and buyouts. It looks like GM will be bringing part of Delphi back as a wholly owned subsidiary, but that's contingent on getting teh deal approved in the Delphi bankruptcy, and there may be some snags there. GM committed to building a small car in the United States. It's not clear whether they are talking about the Cruse or a different one. GM might still import some cars from China, but there will be limits. For complete coverage of a deal including a pdf of the agreement itself, check out the Detroit Free Press coverage at

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