Struggling automaker General Motors Corp. (GM) is unlikely to meet a March 31 deadline set by the U.S. government for gaining concessions from its main union and bondholders, the Wall Street Journal reported Thursday. However, officials of President Barack Obama's auto task force are reportedly agreeable to extending the deadline by another 30 days.
Till date, GM has received $13.4 billion in federal loans from the U.S. Treasury, as part of Troubled Asset Relief Program, and is seeking another $16.6 billion. While receiving the aid, the company was asked to present plans of long-term viability by mid-February. GM proposed additional job cuts numbering about 47,000 and the elimination of certain brands. The automaker was asked to fix deals for bondholders as well as union health-care by March 31.
GM said Thursday that about 7,500 of its United Auto Workers or UAW-represented workers, or about 12% of its U.S. hourly workforce, have accepted buyout offers, with most of them leaving the company by April 1. The company offered $20,000 cash and a $25,000 voucher to buy a new auto to all its hourly U.S. employees in an effort to further trim its blue-collar workforce to bring in line with reduced sales.
The WSJ report added that GM has negotiated another agreement with the UAW union, which could allow it to slash about 10,000 more positions by October.
The latest announcement marks the third round of buyouts and early retirements at GM since 2006, bringing the total hourly reduction to just over 60,500. About 34,000 hourly employees had left the company through a special attrition program in 2006 and another 19,000 hourly employees did the same last year.
Health-care benefits for retirees has been a contentious issue between GM and UAW. UAW wants a a health-care agreement similar to the one it reached recently with Ford Motor Co. (F). However, GM feels that such a deal will not meet its cost-cutting needs. The UAW has refused to come to the negotiation table on the healthcare issue until the bondholders offered deeper concessions.
GM's bondholders hold about $27 billion in unsecured GM debt, and in June, the company will owe them $1 billion on convertible debt that will be due. Any attempt at rescuing the company would require sacrifices from its management, unions and bondholders.
It was reported Thursday that the auto task force believes that there is viable future for GM and Chrysler LLC and would rather recommend additional assistance for the auto companies than let them fall into bankruptcy. However, any additional funding would come with more strings attached.
Steven Rattner, the Treasury's chief auto adviser, said recently in a Bloomberg television interview that GM may need considerably more fund than it has requested from the Fed.
The bondholders are looking to the government to help them solve their problem, but the government cannot solve everybody's problems, and we need the bondholders to become part of this in a constructive way, Rattner had added.
GM closed Thursday's regular trade at $3.41, up $0.42 or 14.05%, on 22.63 million shares. For the past year, the stock traded in the range of $1.27-$24.24.
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