GM Ready to Pull Into Bankruptcy Garage

The American automotive icon watches its shares fall below a buck as it heads for an expected date in bankruptcy court Monday.
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Updated from 05/29/09

General Motors

(GM) - Get Report

shares fell sharply Friday, slouching toward zero, as more pieces of the company's impending bankruptcy fell into place.

Near the close of trading, the stock was down 24% at 85 cents, after dipping as low as 75 cents, a price it had not seen since 1933. The automaker is expected to file for bankruptcy protection on Monday, and before the bankruptcy case is concluded, the shares are expected to be wiped out. However, in most bankruptcy cases, common shares continue to trade on the Pink Sheets until the case is closed.

The United Auto Workers union said Friday that it had made a deal with GM and the U.S. Treasury to revise its contract, reducing costs and also allowing the Volunteer Employee Beneficiary Association, a retiree health care trust administered by the UAW, to accept equity in lieu of cash for a share of GM's funding obligations.

The UAW said 74% of its members supported the deal, expected to trim GM's annual costs by $1.2 billion to $1.3 billion annually. The deal takes effect at 4 p.m. Friday, meaning that it will be in place when GM files for bankruptcy court protection.

Additionally, responding to UAW complaints that it was planning to move production offshore, GM announced Friday that it will build a future small car in the U.S. at an idled UAW-GM facility, which it will retool. The facility has not yet been selected, GM said.

"I would like to personally thank the UAW for agreeing to work with us to ensure our overall manufacturing competitiveness in the United States," said CEO Fritz Henderson, in a prepared statement. By 2013, production at the new site would be expected to push the domestic-manufactured piece of GM's U.S. sales to above 70%, from about 67% today.

At a news conference Friday,

UAW President Ron Gettelfinger hailed the agreement

, saying "this is going to stop the imports coming in here from China and reduce the imports from South Korea." He noted: "We can build those small cars in this country (and) we intend for all these companies to build a small car in this country before it's all said and done."

Meanwhile, Canadian auto parts company

Magna

(MGA) - Get Report

reached a deal Saturday with GM and the German government under which Magna will buy most of GM's Opel unit,

The Associated Press

reported. The agreement separates the German company from the impact of the U.S. bankruptcy filing.

On Thursday, GM reached a deal with a group of bondholders holding about 20% of the $27 billion in unsecured GM bonds. In exchange for 10% of the equity in the new GM, and warrants for 15% more, those bondholders agreed not to oppose GM's plan of reorganization, potentially speeding up the bankruptcy process.

It is widely believed that the less time GM spends in bankruptcy, the more willing consumers will be to consider buying its products. The case is currently expected to take 60 to 90 days.