On Friday, General Motors borrowed an additional $4 billion from the U.S. Treasury and reached a deal with the CAW. GM is still in a showdown with its bondholders, meaning that a bankruptcy filing at the end of the month is likely.
GM had already received $15.4 billion in loans from the Obama administration before taking Friday loan. GM has now received a total of $19.4 billion since the start of 2009, and expects that number to rise to $27 billion after the June 1 government-imposed deadline for restructuring. Most analysts say the company will have to file for bankruptcy to complete the restructuring.
There is some good news, however, about the embattled American auto manufacturer, GM reached a deal with its Canadian union, the CAW. The deal was passed yesterday, with 86 percent of the Canadian union voting in favor of the cost-cutting deal. It will bring GM’s operating costs in Canada down to around $50.90 an hour, a reduction of more than $19.54. This now puts GM’s Canadian labor costs on par with Toyota’s non-unionized Canadian plants.
“This has been a grueling restructuring process, and no one has felt that more than our members and retirees,” said CAW President Ken Lewenza in a statement after the agreement was reached. “Although we were forced to make a number of important sacrifices, the support we received from our members is proof that they recognize the incredible challenges the industry is facing.”
In addition to bringing GM’s Canadian labor costs in line with Toyota’s, the deal makes the American carmaker eligible to receive more loans from the Canadian government. The Canadian national and Ontario provincial governments earlier told the CAW that GM Canada would receive no future government financing unless a deal was reached to significantly lower labor costs.
GM also has reached a tentative agreement with its American union, the UAW. UAW officials are meeting today to hear how many more U.S. factory jobs will be lost in preparation for a quick ratification. The officials represent 54,000 GM factory workers. The union aims to complete the votes by Thursday.
While GM has reached labor deals with its unionized workers, it is still in a showdown with its bondholders. The company is offering to trade debt for equity in a newly restructured GM. The bondholders have balked at the terms of the swap and have not agreed yet. According to most analysts, GM will not be able to complete the deal outside of bankruptcy court.
GM faces a deadline of June 1 for it to complete the deal with bondholders; otherwise the company will be forced into bankruptcy to finish the restructuring. Interestingly, GM’s deadline corresponds with a turning point for Chrysler, as bankruptcy Judge Arthur Gonzalez could rule as early as June 1 on whether Chrysler will be allowed to sell its most valuable assets to a new company, Chrysler Group LLC, under the operational control of Fiat S.p.A.
Source: Automotive News