DETROIT (AP) — General Motors Corp. has prepared a new proposal for bondholders that aims to satisfy the government's demand for much deeper givebacks from creditors, and the company also is working on a new concession package for the United Auto Workers, according to two people briefed on the plans.
The offer to the bondholders, who hold roughly $28 billion in unsecured General Motors debt, will exceed a previous government requirement that GM swap two-thirds of its unsecured debt for company stock, one of the people said.
Both people spoke on condition of anonymity because the negotiations are private.
GM and Chrysler LLC have received $17.4 billion in government loans to fund their operations but the companies are trying to slash costs and debt levels to stave off bankruptcy. President Barack Obama said Monday the carmakers' recently submitted restructuring plans failed to go far enough and gave them strict deadlines to win more concessions from their stakeholders.
The concessions demanded by the White House go deeper than what was required by the Bush administration under the original terms of the government's loans in December.
The government gave GM until June 1 to further restructure or face bankruptcy. Chrysler was deemed unable to stand on its own and was given until April 30 to forge an alliance with Fiat Group SpA or another company. Without an alliance, no more government money will be spent and Chrysler almost certainly would be sold off to pay creditors.
Both companies had a tentative deal with the UAW on wages, benefits and other issues, but the pacts were never presented to union members because both sides failed to reach a deal on swapping stock for half of the company's required payments into a union-run trust that will take over retiree health care costs next year. The trust is called a voluntary employee beneficiary association, or VEBA.
At GM, there are no formal negotiations underway with the union as the company awaits further guidance from the administration's autos task force on just how deep further cuts must be, one of the people said.
It appears the government is going to seek more cuts from older blue-collar workers.
Jared Bernstein, Vice President Joe Biden's chief economist and a task force member, said in an interview Tuesday with WWJ-AM in Detroit that additional concessions may be necessary from older members of the UAW. He noted the union had already made significant cuts for entry-level workers.
"Those concessions are locked in at a level that's extremely competitive, so they've come to the table in that regard. I think there are still some issues with older workers and especially if you look at the full compensation package, including the VEBA," he said.
Bernstein said the UAW's past concessions have been "deep, significant and important. That said, most of those concessions apply to new workers, entry-level workers coming in. There are still lots of workers who are older, more experienced and still benefit from contracts that were signed a long time ago."
In a landmark 2007 contract, the UAW preserved wages of older workers but agreed to the health care trust and lower wages and benefits for many newly hired workers. New hires are paid around $14 per hour, about half the wages of a UAW laborer.
At GM factories, workers are bracing for further cuts, but many say they have given up quite a bit already to help the struggling company. Two local union presidents said Thursday that the workers gave up pay scale raises in the 2007 contract, and their cost-of-living raises were suspended.
The union also has suspended the jobs bank, in which laid-off workers received most of their pay, and it agreed to change work rules governing who can do which jobs in order to make the company more productive.
Jeff Manning, president of a UAW local at a midsize car plant in Kansas City, Kan., said workers also agreed to limits on doctor visits for their families. If they exceed the limits, they must pay most of the cost.
Mike Green, president of a UAW local at a Cadillac factory in Lansing, Mich., said the task force isn't looking at the whole picture. "You can't just make a blanket statement," he said. "If they're not car people, they're not inside it. They don't know."
Green said he heard Obama say he wants all of GM's stakeholders to share the cost-cutting burden.
"If all give some, it's going to be less impact on everybody's life instead of one group shouldering it," he said.
Green said the union has to do its best to take care of retirees, many of whom retired years ago and have very small pensions.
Retired UAW workers are in a difficult position because they don't have the opportunity to vote on the agreement and are dependent upon health care benefits in the VEBA, said Gary Chaison, a professor of industrial relations at Clark University who has followed the UAW.
Chaison said older workers in the union may need to take a pay cut. And he said the government would likely need to provide a backstop for health care costs, guaranteeing payments to the health care fund if GM stock fell below a certain amount or if health care costs increased beyond a certain level.
"If it can protect warranties, it can protect retirees," Chaison said.
Advisers to the GM bondholders' committee said in an e-mail to The Associated Press that they "look forward to reviewing any new terms that GM proposes. We stand ready to forge a workable solution that's fair to all stakeholders, including the tens of thousands of average Americans who hold GM bonds in their pensions, savings accounts and 401(k)s."
The advisers said they welcomed "the opportunity to have real and constructive dialogue with GM and with the task force."
Associated Press Writer Ken Thomas reported from Washington, D.C.
Copyright © 2009 The Associated Press. All rights reserved.