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General Motors thrashes out deal with workers' union over healthcare debts

City A.M. Reporter
GENERAL Motors (GM) and the United Auto Workers (UAW) yesterday reached an agreement on contract changes and restructuring $20bn (&pound;12.6bn) in debt owed to a trust fund for retiree healthcare.<br /><br />The tentative agreement, which was reached after a round of intensive talks involving representatives of the US Treasury, will now go to a ratification vote by UAW-represented workers.<br /><br />Details of the agreement were being withheld until GM workers are briefed on the proposed new contract, the UAW said.<br /><br />A deal between GM and the UAW was one of the key obstacles for the carmaker to clear before a 1 June deadline for the company to restructure its debt as part of a process widely expected to include a bankruptcy filing.<br /><br />By winning a new labor deal with the consent of its major union and the Obama administration, GM is in a position take a plan for creditor concessions into a bankruptcy filing even if it fails to win support from bondholders, analysts said.<br /><br />&ldquo;I&rsquo;m convinced that they have no choice but to file bankruptcy. To the extent that you have constituencies with whom you&rsquo;ve made an agreement prior to filing, it makes the outcome that much easier to achieve,&rdquo; said Scott Peltz, managing director at accounting and consulting firm RSM McGladrey.<br /><br />GM has offered bondholders with $27bn in its debt a 10 per cent stake in the reorganised company.