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GM talks progress, board reviews plan
2009-02-17
GM is seeking concessions from the UAW and creditors under the terms of its $13.4 billion federal bailout and faces a Tuesday deadline to submit a restructuring plan to U.S. officials showing how it can cut costs and pay back the loans. GM was not expected to reach detailed agreements by the deadline but talks with both key groups made progress in the final day, people briefed on the discussions said. GM's board convened via a conference call on Monday to review a draft of the document, which is also expected to detail plans for closing excess plants and disposing of laggard brands like Hummer, Saab and Saturn. Facing the same Tuesday deadline, GM's smaller rival Chrysler LLC was locked in negotiations with the UAW. Those talks were making progress after stalling out over the weekend, people briefed on those parallel talks said. In a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some $28 billion in debt for equity in a document submitted to the automaker, according to a person with knowledge of those talks. GM has not accepted those proposals, which were designed to discourage bondholders from dropping out of the deal in order to maximize its chances for success, the person said. The debt swap is a crucial element in the restructuring plan for GM, which has received $9.4 billion in government aid. A White House aide said another $4 billion in aid would be released as planned on Tuesday ahead of the deadline. Without a framework deal on how to cut GM's crippling debt load, analysts have said the Obama administration would confront a political and economic dilemma in the coming days. A bankruptcy for GM could cost tens of thousands of jobs and topple suppliers and dealers just as the White House is focused on trying to pull the economy from a deeper recession. But expanded aid could cost taxpayers billions of dollars more and risk a stronger bailout backlash by voters. U.S. Rep. Thaddeus McCotter, a Michigan Republican, told Reuters progress in GM's talks with its bondholders appeared to have spurred progress in its talks with the UAW, which is also being pressed to forgive debt. "They will get this done," said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate." U.S. Rep. Sander Levin, a Michigan Democrat, said the automakers remained focused on "how to make this work without bankruptcy." "We've looked at it hard and my personal opinion is bankruptcy would be a failure," Levin told Reuters.