GM Won't Face Penalty From Government For Missed Deadline
24 February 2009 - 10:35AM
Dow Jones News
The U.S. government won't penalize General Motors Corp. (GM) for
failing to meet a Feb. 17 deadline to reach agreements with
shareholders and the United Auto Workers to reduce billions in
debt, according to a federal regulatory filing on Monday.
The deadline was a condition attached to $13.4 billion in
emergency loans GM received since December. The auto maker was
supposed to have term sheets signed by the union and a group
representing bondholders that would have eliminated nearly $30
billion in debt.
But GM said it needed more time to bargain after marathon
negotiations failed to produce deals with a bondholders' committee
or the union.
Chrysler LLC, which received a $4 billion loan, was subject to
the same terms as GM and also failed to reach deals with the UAW or
debtors, although talks still continue. A spokesperson from
Chrysler was not immediately available for comment on Monday.
GM and Chrysler last week both asked for more money - as much as
$21.6 billion - to survive the economic downturn. The companies
also presented more extensive restructuring plans that include more
job cuts, factory closings and eliminating nameplates and
dealers.
Monday's filing did not specify a new deadline for GM. However,
both auto makers are required to ratify new cost-cutting deals with
the union and have debt swaps underway with bondholders by March
31. The government could demand the money back if the companies
fail to meet that deadline.
At GM, negotiations have stalled as the UAW and bondholders
demand more financial sacrifice from other parties. GM had said a
lack of direction from the U.S. Treasury also contributed to the
slow pace of negotiations.
GM and Chrysler are looking to use more equity and less cash to
fund billions in retiree healthcare obligations. They are looking
to bondholders to swap at least two-thirds of their debt for
equity.
Ford Motor Co. (F), which hasn't asked for aid, on Monday struck
a deal with the UAW to reduce the auto makers' retiree health care
trust expense. Ford now has the option to use equity and cash to
support the trust fund.
The UAW agreed to money-saving concessions with all three auto
makers. Members still must vote on changes to the contract.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.