By Tom Krisher and Ken Tomas
Reuther, who heads the UAW's Washington office, said he had not been updated on the talks since Sunday night but he doesn't expect agreements before Tuesday. He said the Obama administration's appointment Sunday night of a task force to oversee the automakers' restructuring should get things moving. "I think this is an ongoing process, and having the Obama administration finally putting this task force in operation, hopefully it will be able to facilitate discussions going forward," Reuther said. At GM, UAW bargainers walked out of talks Friday night in a spat over the company's contributions to a union-run trust fund that will take on retiree health care expenses starting next year. Although talks resumed Sunday, Reuther said the union's concerns had not been resolved. GM is likely to seek more money, at least up to the $18 billion that it requested from Congress in December under its worst-case scenario projections. That scenario has arrived with U.S. sales at a 26-year low and auto sales dropping in other parts of the world, a person briefed on GM's plan said. The plan will stick with GM's public strategy of trying to remain viable and avoiding Chapter 11 bankruptcy protection, said the person, who spoke on condition of anonymity because the plan has not been finalized. GM's plan will discuss cost savings from labor concessions and additional plant closures, but the locations of those plants will not be revealed, another person briefed on the plan said Monday. The number of factories to be closed wasn't available.
GM's board met Monday by teleconference to go over the plan, but details could not be obtained. The people briefed on the plan said it will include more information about how GM will cut some of its eight brands, although nothing will be finalized. The company already has said Saab and Hummer are up for sale and Saturn is under review, leaving GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models. Earlier, local union officials said negotiations had been slowed by the Obama administration's delay in appointing a "car czar." But Sunday night, the White House announced a task force to oversee the companies' restructuring. The administration named Ron Bloom, a former Lazard Freres & Co. investment banker, a key adviser, according to The Wall Street Journal, which cited people familiar with the task force. Bloom, who advised U.S. steelworkers in several bankruptcy cases, is expected to take the lead role on the task force, the Journal said. The competing interests of debtholders also slowed the labor talks, as no stakeholder wants to make concessions before the other. Under the terms of GM and Chrysler's loans, both companies must use their best efforts to reach "targets" to reduce debt and labor costs. One target says the automakers need to make half of their payments into the health care trust in the form of stock rather than cash. Another requires the companies to reduce unsecured debt by two-thirds by swapping debt for equity. The terms also seek labor cost parity with Japanese automakers that have U.S. plants.
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 the run the risk of losing it all if GM files for bankruptcy protection.
"Bondholders are pretty famous for playing chicken," Ross said. "I just hope that they're rational enough not to overplay their hand here." Associated Press Writer Ken Thomas reported from Washington.