February 19, 2009 at 1:00 am

GM to deal with UAW, investors

DETROIT -- General Motors Corp. expects to accelerate talks about reaching money-saving concessions with the United Auto Workers and bondholders now that the automaker's restructuring plan has been filed with the federal government.

Those talks will be difficult, particularly with bondholders, who are being asked to accept about 33 cents on the dollar and forgive billions in debt while the UAW appears to be getting a more favorable deal, analysts said Wednesday. And though GM analyzed and downplayed any benefit from filing bankruptcy, analysts said weak consumer demand and other factors could trigger a filing.

President Barack Obama's newly created auto task force also will be involved in the talks with the UAW and bondholders, Ray Young, GM's chief financial officer, said during talks with analysts Wednesday. His comments came less than 24 hours after the automaker filed its restructuring plan seeking up to $16.6 billion in additional federal loans.

"We expect the pace to really start picking up immediately," he said.

GM and Chrysler LLC, which also received federal aid, have until March 31 to make progress on concessions with the UAW and bondholders, two key parties that hold power to help the struggling automaker restructure and become a viable company.

The UAW said Tuesday it had reached tentative agreements with Detroit's Big Three automakers on cost-cutting concessions -- though no details were released. The concessions include cutting overtime and lump-sum cash bonuses, changing work rules and getting rid of cost-of-living pay raises.

The lack of details is affecting negotiations with bondholders, who are seeking shared sacrifice with the union, according to a statement issued by advisers representing a committee of GM's largest institutional bondholders.

"As we begin our analysis of the restructuring plan submitted by GM's management, it is important to note that we cannot make an accurate or conclusive assessment of the company's long-term viability without specific details of the tentative agreement GM has reached with the UAW regarding wages, or without knowledge of how GM plans on treating its obligations to UAW pension and health care trusts," bondholder advisers said in the statement.

Terms of the $17.4 billion loan package that is keeping GM and Chrysler LLC afloat during a slumping sales market require GM to restructure payments into a UAW-run retiree health care trust and to cut the automaker's $27 billion in unsecured public debt by two-thirds to $9.2 billion.

Bondholders cite hourly and salaried pension costs for doubling GM's long-term debt. In 2003, GM executed a $13.4 billion bond offering to partially fund the automaker's U.S. pension funds and other retiree benefits. The offering helped to increase GM's long-term debt from $14.3 billion to $29.6 billion, according to regulatory filings.

GM has pumped $103 billion into its pension and other retirement plans over the past 15 years.

"There definitely is a big concern the pensions have dug them into this big hole," said a source familiar with talks between bondholders and GM. "When is the cycle going to end?"

GM chairman and CEO Rick Wagoner said the automaker might need additional loans in 2013 and 2014 depending on valuations of pension obligations.

The restructuring plans filed Tuesday -- which included requests from both automakers for an additional $21.6 billion -- lacked signed term sheets from the UAW and bondholders agreeing to cost-saving concessions.

Young said GM had received a waiver and needs to show progress on both fronts by March 31. If progress hasn't been made by then, the loans could be called back, forcing a bankruptcy filing.