UAW Agrees to Plan to Help Save GM

The United Auto Workers union said Thursday it had reached a "tentative understanding" with the U.S. Treasury and General Motors on contract changes aimed at averting bankruptcy at the auto giant. The announcement came as GM was scrambling to get concessions to prove its viability as a deadline approached for a likely bankruptcy filing. The UAW said the agreement, which requires member ratification, would modify the 2007 collective bargaining agreement with GM and also modify a trust fund that covers health care for GM employees and retirees. "Details are being withheld pending explanation and ratification meetings for UAW GM members, which are in the process of being scheduled," the statement said. GM is funding its operations with more than $15 billion in emergency government loans and faces a June 1 deadline to complete a major restructuring plan or be forced to follow its rival Chrysler into bankruptcy court. It must also reach an agreement with bondholders to slash its massive debt load with an equity swap. GM also indicated this month it was to shrink its dealer network 40%, cutting some 2,300 sales outlets by the end of 2010, under a stepped-up effort to prove viability and avert bankruptcy. Although GM does not incur direct costs from the dealers, the sales outlets must be able to invest in the brand to keep GM viable, according to GM executives, who acknowledged the possibility of legal challenges to the dealer plan. In late March, President Barack Obama gave GM another 60 days to come up with a "more aggressive" cost-cutting plan to keep government funding and avert bankruptcy. The president served notice however that there would not be an "unending" supply to taxpayer dollars to prop up the Detroit giants and said an option still on the table was bankruptcy court-supervised restructuring with government support to help the firm wipe out crushing debts and obligations. Chrysler was forced into bankruptcy after some lenders balked at a deal to reduce their outstanding debt. The lenders later dropped their opposition, leaving the court likely to approve a quick reorganization that allows Chrysler to get a fresh start in partnership with Italy's Fiat. Copyright Agence France-Presse, 2009