General Motors Corp and the United Auto Workers have reached an
agreement on contract changes and restructuring $20 billion in debt
owed to a trust fund for retiree healthcare, the union said on Thursday.

The tentative agreement, which was reached after a round of
intensive talks involving representatives of the U.S. Treasury, will
now go to a ratification vote by UAW-represented workers.

Details of the agreement were being withheld until GM workers are
briefed on the proposed new contract, the union said in a statement.

A deal between GM and the UAW was one of the key obstacles for the
automaker to clear before a June 1 deadline for the company to
restructure its debt as part of a process widely expected to include a
bankruptcy filing.

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.

I'm convinced that they have no choice but to file bankruptcy. To
the extent that you have constituencies with whom you've made an
agreement prior to filing, it makes the outcome that much easier to
achieve, said Scott Peltz, managing director at accounting and
consulting firm RSM McGladrey in Chicago.

GM has offered bondholders with $27 billion in its debt a 10-percent
stake in the reorganized company. Bondhdolders have until the end of
Tuesday to accept that offer.

The embattled automaker has indicated that it would likely file for
bankruptcy unless about $24 billion in that bond debt -- or 90 percent
of the total -- is extinguished in the debt exchange.

I think the bond exchange that's on the table right now is dead on
arrival so unless the deal is somehow sweetened then there's no way
they're going to get the 90-percent approval that they need, said Pete
Hastings, a fixed-income analyst at Morgan Keegan in Memphis.

All this is just positioning in my view for the bankruptcy filing
that we expect to happen in the relatively near future, Hastings said.

GM has offered the U.S. Treasury a majority stake in a restructured
company. The UAW would get 39 percent while existing shareholders would
be left with a 1-percent ownership stake.