The United Auto Workers union has placed concession talks with General Motors on the back burner as it tries to reach a deal with Chrysler before an April 30 government deadline, two people briefed on the negotiations said Thursday.
The decision likely means that any deal with Chrysler will set the pattern for concessions granted to GM as both companies try to show the government they have cut costs enough to get more government loans.
The people, who spoke on condition of anonymity because the talks are private, said the union is focusing on Chrysler because its government deadline to cut labor costs and swap debt for equity is just two weeks away.
Chrysler also has to ink an alliance deal with Fiat Group SpA by April 30 to get more government aid. Without further help, Chrysler likely would be auctioned off in pieces under bankruptcy court supervision.
GM's government deadline is June 1, but the Obama administration said it will provide bankruptcy financing if the company can't successfully restructure outside of court.
GM spokeswoman Sherrie Childers Arb and UAW spokeswoman Christine Moroski would not comment on the negotiations.
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Chrysler spokeswoman Shawn Morgan would not comment beyond a statement that the company has a goal is to reach a conclusion by April 30.
The Canadian Auto Workers union has said that it plans to resume negotiations with Chrysler on Monday after Fiat CEO Sergio Marchionne said the Italian automaker will walk away from the proposed tie-up unless Chrysler's unions agree to major cost cuts.
Canadian Industry Minister Tony Clement said Thursday that the CAW must make significant concessions to ensure Chrysler survives.
Without a deal in the next two weeks, the Canadian government will also shut down its support for the troubled automaker, Clement said.
Chrysler, GM and Ford all reached concession deals with the UAW in February to limit overtime, cut lump-sum cash bonuses and eliminate cost-of-living pay increases.
The union also agreed to suspend the jobs bank in which laid-off workers are paid most of their wages.
Workers at Ford, which is not receiving government aid, ratified their deal, but the GM and Chrysler agreements were never presented to union members because they got hung up on funding for a union-run trust that will take over retiree health care expenses next year.
Then, the Obama administration said last month that the cuts outlined in GM and Chrysler's viability plans didn't go far enough, and the union would have to give up more.
Just how much more has not been stated publicly. GM has received $13.4 billion in government loans and may need more money this month as it tries to survive the worst auto sales downturn in 27 years.
Chrysler has received $4 billion and may also need more funding to stay alive until its deadline.
The government said it will lend Chrysler up to $6 billion more if it completes a deal with Fiat and gains concessions from unions and debtholders.
But creditors that hold $6.9 billion in Chrysler debt—mostly banks and hedge funds—have rejected an offer from the Treasury Department to erase the debt for $1 billion.
They are preparing a counteroffer that likely will include more cash and an equity stake in the company.
A committee representing the holders of $28 billion in GM bonds is awaiting an offer from the company that aims to slash its unsecured debt by at least two-thirds.