UAW: Bondholders Stalling Deals With GM, Chrysler
March 19 2009 - 3:58PM
Dow Jones News
A top United Auto Workers official is accusing lenders to
General Motors Corp. (GM) and Chrysler LLC of stalling a debt-swap
deal needed to win more federal aid.
In a letter sent this week to U.S. lawmakers, UAW legislative
chief Alan Reuther says bond holders and other lenders are
resisting terms set by the U.S. government when it extended
emergency loans to General Motors Corp. and Chrysler LLC.
The companies are asking for up to $21.6 billion in additional
loans, and face a March 31 deadline to cut deals with the union and
bondholders.
Reuther also argued that retired hourly auto workers should be
spared from further sacrifices.
The letter is the latest salvo in a three-way tug-of-war between
the union, auto makers and their bond holders over eliminating
billions of dollars in debt from the companies' balance sheets.
Negotiations with both groups have stalled as each accuses the
other of refusing its fair share of concessions.
"UAW active and retired members have already stepped up to the
plate and made sacrifices to help the auto maker restructure,"
Reuther said in the letter, dated March 16 and addressed to members
of Congress and the Senate. "Unfortunately, bondholders and other
lenders are still resisting the restructuring targets set forth in
the Treasury loan agreements."
GM, under the loan deal, is required to cut a deal with
bondholders to swap about two-thirds of the company's $27 billion
in debt for equity in a restructured GM.
The union is being asked to accept half of $20 billion GM owes
to cover retiree health care in the form of equity rather than
cash.
A group representing GM bondholders has argues they are being
asked to take a deeper cut than the union. In a statement this
week, the group said it had presented GM with a framework of a deal
that would have met government stipulations.
The union says its members have accepted many costly givebacks
over the years, including concessions agreed to last month as part
of amended labor deals between the union and Detroit's auto
makers.
Retirees, Reuther said, have been forced to take no additional
health care costs over the years.
The UAW granted Ford Motor Co. (F) similar concessions to GM and
Chrysler even though the company isn't asking for federal aid.
Chrysler's loan terms have not been made public because the
company is privately held.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.