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GM says UAW contract changes could save $1.1B
Negotiations with UAW, bondholders 'effectively linked'
April 1, 2009 - 2:46 pm ET
DETROIT, April 1 (Reuters) -- Changes to General Motors' contract with the UAW could save the automaker $1.1 billion or more a year in hourly labor costs, GM said in a report to the U.S. Treasury Department released today.
This is the first time GM has attached a dollar value to the proposed changes. Neither the company nor the UAW has disclosed what those changes entail, and the revised contract has not been put up for a ratification vote by union members.
The UAW's current four-year contract with GM and other Detroit-based automakers runs until 2011.
GM's disclosure of projected cost sayings was the first time it had commented on the pending contract changes. It was contained in an update on its previous turnaround plan filed with Treasury on Monday.
The report was filed with U.S. officials on the same day that President Barack Obama rejected GM's existing restructuring plan as too limited and gave the automaker a 60-day deadline to negotiate new concessions from the UAW and bondholders under the threat of bankruptcy.
The automaker said the UAW contract changes would take its total hourly employment costs on an annual basis to $6.5 billion in 2009 from $7.6 billion in 2008.
GM said the savings could be larger if it were able to bring in more lower-cost new hires or temporary workers.
GM has been operating since the start of the year with $13.4 billion in emergency loans approved in late December by the Bush administration.
Terms of those loans had set a target for GM to cut its hourly compensation to make the company competitive with the U.S. factory costs of Japanese automakers, led by Toyota Motor Corp.
In its filing, GM said negotiations with the UAW had been continuing "in earnest" but said its ability to reach a deal with the union was "effectively linked" to reaching a deal with debtholders.
GM's negotiations with the UAW center on proposals to reduce $20 billion owed to a union-affiliated trust fund for retirees by $10 billion by swapping preferred stock or other forms of equity for cash.
GM bond owners, who hold about $28 billion of the automaker's debt, are being asked to write off more than two-thirds of the amount they are owed.
Bondholders have been offered about $2.2 billion in cash, $4.3 billion in new debt and a stock-based payout that would give them 90 percent of the common stock of a recapitalized GM as part of a proposed debt swap, said a person familiar with the matter.
Negotiations with UAW, bondholders 'effectively linked'
April 1, 2009 - 2:46 pm ET
DETROIT, April 1 (Reuters) -- Changes to General Motors' contract with the UAW could save the automaker $1.1 billion or more a year in hourly labor costs, GM said in a report to the U.S. Treasury Department released today.
This is the first time GM has attached a dollar value to the proposed changes. Neither the company nor the UAW has disclosed what those changes entail, and the revised contract has not been put up for a ratification vote by union members.
The UAW's current four-year contract with GM and other Detroit-based automakers runs until 2011.
GM's disclosure of projected cost sayings was the first time it had commented on the pending contract changes. It was contained in an update on its previous turnaround plan filed with Treasury on Monday.
The report was filed with U.S. officials on the same day that President Barack Obama rejected GM's existing restructuring plan as too limited and gave the automaker a 60-day deadline to negotiate new concessions from the UAW and bondholders under the threat of bankruptcy.
The automaker said the UAW contract changes would take its total hourly employment costs on an annual basis to $6.5 billion in 2009 from $7.6 billion in 2008.
GM said the savings could be larger if it were able to bring in more lower-cost new hires or temporary workers.
GM has been operating since the start of the year with $13.4 billion in emergency loans approved in late December by the Bush administration.
Terms of those loans had set a target for GM to cut its hourly compensation to make the company competitive with the U.S. factory costs of Japanese automakers, led by Toyota Motor Corp.
In its filing, GM said negotiations with the UAW had been continuing "in earnest" but said its ability to reach a deal with the union was "effectively linked" to reaching a deal with debtholders.
GM's negotiations with the UAW center on proposals to reduce $20 billion owed to a union-affiliated trust fund for retirees by $10 billion by swapping preferred stock or other forms of equity for cash.
GM bond owners, who hold about $28 billion of the automaker's debt, are being asked to write off more than two-thirds of the amount they are owed.
Bondholders have been offered about $2.2 billion in cash, $4.3 billion in new debt and a stock-based payout that would give them 90 percent of the common stock of a recapitalized GM as part of a proposed debt swap, said a person familiar with the matter.
