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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV