The union fears that if it takes too much stock, the trusts won't have enough to pay benefits for hundreds of thousands of retirees and spouses.
Some bondholders are reluctant to take roughly 30 cents on the dollar because they think even if they don't go along with the plan, the government won't allow GM to go into bankruptcy.
"Here you have a competition between bondholders and the union," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "That's where I think the feds become very important as an arbitrator."
Advisers to the bondholder committee negotiating with GM delivered a proposal Sunday night that is consistent with the government's terms, according to a person familiar with the talks. The person spoke on condition of anonymity because of the sensitivity of the talks.Details of the bondholders' proposal were not available, and the person said additional work remained and talks were continuing Monday night. GM has about $28 billion in unsecured debt. Chrysler has about $9 billion in mostly secured debt. GM has to pay roughly $20 billion into the health care trust, while Chrysler must pay around $9.9 billion. Billionaire Wilbur L. Ross Jr., who has rescued numerous failed companies in the steel and other industries, said Monday that GM can't be cost competitive with Japanese automakers with such a heavy debt burden. Bondholders, he said, traditionally hang on for the best deal but run the risk of losing it all if GM files for bankruptcy protection.