UAW Ratifies GM Labor Deal, Eases Bankruptcy Path

The United Auto Workers union has ratified a package of concessions designed to reduce General Motors'  labor costs, completing a key piece of the automaker's massive restructuring effort.

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UAW President Ron Gettelfinger said at a news conference Friday that 74 percent of GM's 54,000 U.S. production and skilled-trade workers voted in favor of the deal.

The vote comes before an expected Chapter 11 bankruptcy protection filing by GM on Monday.

Bankruptcy experts say having the labor agreement in place will help move the process through court more quickly.

"We accept what it is and did the best we could," Gettelfinger said.

"We've given a lifeline to GM until they can rebound." UAW leaders agreed to the revised contract last week that freezes wages, ends bonuses, eliminates noncompetitive work rules and ends the possibility of a strike until the next contract expires in 2015.

The UAW said the cuts would save GM $1.2 billion to $1.3 billion a year.

"We very much appreciate the support of our employees and retirees," Diana Tremblay, GM vice president for labor relations, said in a statement.

"Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks." The agreement also gives a union-run retiree health care trust 17.5 percent ownership of a post-bankruptcy protection GM, with a warrant to buy another 2.5 percent.

The trust will take on the company's retiree health care costs starting next year. The stock will come in exchange for part of the company's $20 billion obligation to the trust.

The trust also will get $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note.

Gettelfinger said the union "didn't put a whole lot of emphasis" on the 2.5 percent warrants, which can be exercised when GM's value reaches $75 billion. The company's equity value currently stands at $683 million. "We feel comfortable with where we're at with the 17.5 percent. We're comfortable with the preferred stock," he said.

"We're basing everything else on reality." GM has received $19.4 billion in loans from the U.S. government, which would get 72.5 percent ownership of the new company, perhaps sharing with the Canadian government.

The remaining 10 percent would go to GM bondholders to wipe out $27 billion in unsecured debt. Bondholders have until 5 p.m. EDT Saturday to accept or reject the stock-for-debt offer, under which they would get a warrant for an additional 15 percent of the new GM's stock.

Existing GM shareholders would be left with little or nothing, and GM shares fell 32 cents, or 29 percent, to 80 cents in afternoon trading.

They fell as low as 75 cents earlier Friday, their lowest level since the Great Depression.

Plans are for GM to emerge from bankruptcy with lower labor costs, far less debt and with fewer factories, brands, models and dealerships.

Even workers at factories in Spring Hill, Tenn.; Pontiac, Mich.; and Orion Township, Mich., that are under discussion for possible closure approved the deal.

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"I believe that our membership understands. They get it," said Ray Wood, president of a UAW local at a Toledo, Ohio, transmission factory that voted 78 percent in favor of the deal.

On Monday, GM is to identify 14 assembly, parts stamping and engine and transmission factories that it plans to close as part of its restructuring plan, cutting 21,000 jobs.

Gettelfinger said GM is "getting close" to finalizing which plants will close.

He said four of GM's plants slated to close will remain on "standby" with the hopes that vehicle sales will rise, creating greater demand.

GM announced earlier Friday that one of those 14 plants would be retooled to make subcompact cars starting in 2011.

Meanwhile, the White House commented on the latest GM moves.

Chrysler's bankruptcy proceedings show the possibility of an orderly restructuring of a major U.S. carmaker and could be a model for General Motors, the White House said Friday.

"Chrysler is a hopeful example for General Motors," White House spokesman Robert Gibbs told reporters.

GM is expected to file for Chapter 11 protection by Monday and President Barack Obama will likely discuss the next steps in its reorganization at that time.

Gibbs said the government, which has been directing restructuring at GM and Chrysler, believes GM has taken important steps in restructuring ahead of Monday's government-imposed deadline to prove it can survive without government aid or seek court protection to finish the job.

"I know the president is encouraged that whatever happens at the deadline, the progress that is being made to restructure General Motors and put it on a path to being a viable auto company - we have seen encouraging signs," Gibbs said.

On the Chrysler bankruptcy, the White House believes the case is winding down in New York and is headed for the result envisioned by the administration when the automaker sought court protection on April 30.

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