Friday, May 22, 2009

Report : GM reach agreetment with UAW and CAW unions, but bankruptcy still "probable"

June 1, which is just a week away, is the deadline that President Barack Obama and his Auto Task Force Department have decided for GM to show their new full viability plan on which it will decide to seek loans, or force into Chapter 11 bankruptcy filing. Well, General Motors is still doing is best to avoid that.

GM and the U.S. Treasury Department have reached a deal with the United Auto Workers (UAW), one of the key hurdles that GM needs to clear before its June 1 deadline to avoid bankruptcy. UAW said that the deal is similar to the Chrysler deal. That means, GM is going to spend about $10 billion covering for worker insurance while working for the company's factories, and even at retirement.

GM also needs to please the Canadian Auto Workers (CAW) union, because GM also builds cars in Canada. Gladly, it's reported today that General Motors and Canadian Auto Workers have reached a deal that will help the automaker cut costs, allowing it to meet the terms for additional government loans. Ken Lewenza, head of the CAW, said it was "a struggle" to reach a deal with GM, but he added that the union had done the best it could under the circumstances, saying: "we have protected most of our core benefits."Like the UAW deal, GM has to offer a lot of benefits to the factory workers. The deal also keeps GM's plants in Oshawa, St. Catharines and Woodstock open for the foreseeable future.

So with Workers unions on GM's side, will it really help avoiding Chapter 11 bankruptcy? Well, auto analysts say that even if the new agreement is ratified, it may not be enough to keep GM out of bankruptcy court. GM is still trying to get creditors, that hold $27 billion of its bonds, to accept a debt-for-stock swap. CEO Fritz Henderson has previously said that it may be difficult to reach an agreement with bondholders, making bankruptcy “probable.” So we are probably going to see GM falling with Chrysler into Chapter 11 bankruptcy.

Source: [CNNMoney and CTV]

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