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GM Unlikely To Reach Deal with Bondholders before the Dept for Equity Swap Deadline

Bankruptcy closer to reality for a second U.S. automaker.

by on May.19, 2009

President Barack Obama and President Barack Obama shakes hands with GM President Fritz Henderson, AP Photo/Charles Dharapak

The dispute over GM exporting jobs is shaping up to become a major political headache for the Obama Administration, with its claims to be promoting policies that will create American jobs.

General Motors Corporation late today filed a prospectus supplement with the Securities and Exchange Commission about its exchange offers for $27 billion of its unsecured public notes and the related consent solicitations that began on April 27, 2009.

In plain English, the filed supplement says that as of today GM has not reached agreements with its bondholders about a debt-for-equity swap — and it is unlikely to do so before the midnight May 26, 2009 expiration date.

Since the swap is a key element in its revised “viability plan” bankruptcy appears certain. The bondholder deal is necessary to obtain the agreement of the U.S. Treasury Department for further financing. It is also needed for the United Auto Workers Union and the VEBA-settlement class representative to accept GM stock for cash payments due. Bondholders, as they did in the case of the now bankrupt Chrysler LLC, are not cooperating. And the UAW is taking a hard line over other aspects of the plan.

Ron Gettelfinger, president of the UAW, spent the afternoon at the U.S. Treasury Department in Washington, D.C. While not commenting directly on what the issues concerning the union are, Gettelfinger went public over the weekend with at least one of them by releasing a letter to members of Congress that complained about the doubling of imports by GM from non-union and restricted-trade countries in Asia. The union wants job guarantees as part of the fragile, controversial deal Treasury is trying to put together to save GM.

Alan Reuther, UAW Legislative Director, wrote Congress that “As the discussions continue concerning the restructuring of General Motors, the UAW wishes to restate our strong opposition to the company’s plan to close 16 manufacturing facilities in the United States, while at the same time dramatically increasing the number of vehicles it will be importing from Mexico, Korea, Japan and China for sale in this country. We urge Members of Congress to join with the UAW in urging the Obama administration to insist, as part of any further government assistance, that GM should be required to maintain the maximum number of jobs in the U.S., instead of outsourcing more production to these other countries.”    (more…)

UAW Strongly Objects to GM’s U.S. Factory Closings

Negotiation deadlock spills over into public lobbying by union.

by on May.18, 2009

Kevin Melton, UAW Local 602, courtesy UAW

The implication is the Auto Task Force has told the union the closings will proceed.

With the 31 May deadline approaching for GM’s revised plan, the United Autoworkers Union on Friday sent a letter to members of the U.S. Congress objecting to the centerpiece of GM’s Viability plan – closing 16 plants in the U.S. and importing vehicles from low-wage, non-unionized countries.

The factory closings are not new, they have been in various versions of the plan since GM went to the U.S. government for bridge loans late, last year, but in bringing the argument over the closings public, the union is attempting to prevent some of them through political pressure after apparently being shut down at the bargaining table. The implication is that the Auto Task Force has told the union that the closings will proceed.

Alan Reuther, UAW Legislative Director, wrote Congress that “As the discussions continue concerning the restructuring of General Motors, the UAW wishes to restate our strong opposition to the company’s plan to close 16 manufacturing facilities in the United States, while at the same time dramatically increasing the number of vehicles it will be importing from Mexico, Korea, Japan and China for sale in this country. We urge Members of Congress to join with the UAW in urging the Obama administration to insist, as part of any further government assistance, that GM should be required to maintain the maximum number of jobs in the U.S., instead of outsourcing more production to these other countries.”

The Chrysler restructuring plan now being worked out in bankruptcy court in New York City also closes U.S. factories and turns the company over to off-shore based Fiat. The factory closings, though, are smaller in number and the small cars and engines that will be supplied by Fiat will be built in the U.S., Canada or Mexico. Furthermore, by getting access to Fiat’s overseas distribution system, exports of Canadian or U.S. made vehicles could increase, preserving or creating UAW jobs.

Subscribe to TheDetroitBureau.comThe core issue the union is raising – U.S. jobs — is an aspect of industrial policy debates that politicians from both the Democratic and Republican parties have ducked for decades. With unemployment at record levels and increasing, our lack of industrial policy is glaringly obvious. Every major nation in the world has policies, laws, tariffs and non-tariff regulations that protect jobs and encourage the export of goods and services into the large, profitable and unrestricted U.S. market.   

U.S. employment continued to decline in April as another 539,000 jobs evaporated to total 13.7 million out of work people, and the unemployment rate rose from 8.5% to 8.9%, according to the Bureau of Labor Statistics. Since the recession began in December 2007, 5.7 million jobs have been lost. In April, job losses were large and widespread across nearly all major private-sector industries. Overall, private-sector employment fell by 611,000. Over the past 12 months, the number of unemployed persons has risen by 6.0 million, and the unemployment rate has grown by 3.9 percentage points. 

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