Reuters reports that talks are breaking down between GM and the UAW, with this week’s dealine looming for submitting a restructuring plan. Here’s the major sticking point.
The UAW is owed some $20 billion by GM, money pledged to a healthcare trust for retirees. The union faces demands that it surrender its claim to half of that amount in exchange for stock in a recapitalized GM under the terms of the federal bailout for the automaker.
For his part, UAW President Ron Gettelfinger has balked at saddling retired workers with additional risk by taking devalued GM stock instead of cash.
If I was a GM retiree I’d be royally pissed off, but it’s pretty clear that GM is out of cash and prospects are dim. Meanwhile the UAW is saying in effect, “We’re not going to take worthless stock in place of cash. Instead we want the government to pump in cash in exchange for worthless loan promises.”
Some major bondholders feel the same way, so it’s not just the UAW to be fair. But all this seems to have GM considering what some people felt should have happened to begin with – i.e. $9.4B ago – Chapter 11. So the game of chicken continues. And it’s pretty much the same story with Chrysler.