GM concession talks begin In a series of historic talks expected to be tense and sweeping at times, General Motors Corp. will launch formal negotiations this week with the United Auto Workers, bondholders, dealers and others to transform the automaker into a smaller, viable company.
GM has pledged to revamp labor contracts, reduce debt and shrink the number and type of vehicles it produces to satisfy conditions imposed after the federal government granted the automaker and Chrysler LLC $17.4 billion in emergency federal loans. The loans will ensure the companies survive through March, but each automaker must develop plans by Feb. 17 to ensure long-term viability.
GM needs financial concessions to implement a restructuring plan unveiled last month that includes eliminating up to 31,000 jobs, shutting nine plants and renegotiating its 2007 labor contract with the UAW. GM also wants to close 1,750 dealerships, possibly eliminate Saturn and convince banks and bondholders to swap some of the company's debt for equity.
Key stakeholders such as the UAW have resisted calls for additional wage and benefit cuts. But unless GM and Chrysler receive concessions from the union and others -- or President-elect Barack Obama relaxes restructuring targets -- they could be forced to file bankruptcy, a threat that looms over the negotiations, analysts and industry experts said.
"Nobody wants to go there," said David Cole, chairman of the Center for Automotive Research in Ann Arbor.
To stay afloat during the upcoming talks, GM received a $4 billion loan from the government on Jan. 31. GM is scheduled to get another $5.4 billion on Jan. 16 and $4 billion more Feb. 17, if Congress opens the second half of the $700 billion Wall Street rescue package. A $4 billion loan for Chrysler LLC was finalized Friday and the troubled automaker is expected to begin restructuring talks this week too. Detroit News
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