DOW JONES NEWSWIRES
The United Auto Workers union said it overwhelmingly ratified
its new labor agreement with General Motors Corp. (GM), getting the
auto maker over a major hurdle in its restructuring plan.
UAW President Ron Gettelfinger said the plan was passed with 74%
support and that it will take effect at 4 p.m. EDT.
GM, which is surviving on federal loans, is racing to
restructure by June 1 under the close watch of the Obama
administration. It is widely expected the company will follow rival
Chrysler LLC into bankruptcy protection on Monday under a plan that
would give the U.S. government a 72.5% stake. The U.S. will boost
its support for GM by as much as $50 billion and keep it closely
held for up to 18 months.
The deal gives the union's independent trust fund for retiree
health care a 17.5% stake in the new GM and warrants for another
2.5% stake. Gettelfinger has said the union accepted a smaller
stake than it wanted to ensure the deal would be completed. In
exchange, the UAW will get $6.5 billion in preferred stock and a
$2.5 billion note. The union will also get one representative on
GM's board.
As part of the pact, the auto maker agreed to make subcompact
cars in the U.S., rather than China or South Korea. GM announced
plans earlier Friday to build such vehicles at a to-be-determined
idled plant, spending $600 million to $700 million in the process,
said people familiar with the plan.
Other terms of the pact were said to largely mirror concessions
the UAW granted Chrysler LLC last month, including a suspension of
cost-of-living allowances, bonuses and some holidays, according to
people familiar with the situation.
The union presented the pact to 60,000 GM workers Tuesday. About
a third of those employees will lose their jobs under GM's
restructuring plan.
Earlier Friday, GM took another step in its restructuring with a
tentative deal to sell its European brands to Canadian auto
supplier Magna International Inc. (MGA). But closing that deal will
require some help from the German government.
GM shares were recently down 30% at 79 cents. The stock will
likely become worthless if a bankruptcy filing takes place.
-By Jay Miller, Dow Jones Newswires; 201-938-2331;
jay.miller@dowjones.com