General Motors Sets Monday Press Event;Henderson Likely to Detail Chapter 11 Filing

General Motors Sets Monday Press Event;
Henderson Likely to Detail Chapter 11 Filing

May 30, 2009 9:18 a.m.
By Roberta C. Yafie
NEW YORK — General Motors Corp, will hold a midday press conference here Monday to detail the company’s future and, it is expected, its filing for bankruptcy protection.

Fritz Henderson, GM’s president and chief executive officer, will conduct the session. A specific time has yet to be determined, GM said Friday.

The announcement capped days of negotiations between GM, the U.S. Treasury Dept.’s Auto Task Force, the United Auto Workers union and GM’s bondholders. The federal government’s plan, outlined in a GM filing with the U.S. Securities and Exchange Commission, is designed to avoid a long, drawn out bankruptcy and keep the federal government out of the automotive business.

The White House has stated it does not want to be in the automotive business. But the deal struck with the UAW gives the U.S. and Canadian governments a 72.5% stake in the New GM.

• The United Auto Workers union ratified by 74% modifications to its collective bargaining contract with GM, agreeing to cuts in retiree health care benefits that will have ramifications for the union’s Voluntary Employee Beneficiary Association trust funding. The trust’s share in the new GM would be 17.5%. Warrants in the reorganized company could life that holding to 20%.

• A panel of GM’s bond holders representing approximately 20% of GM’s debt gave the thumbs up to a sweetened deal that would give them a 10% stake in the revamped GM if they will forgive the $27 billion in unsecured debt and agree not to oppose the reorganization in court. The bondholders also would receive warrants in the new GM that could be exchanged to increase their stake to 25%. Deadline for a vote by all the bond holders to the government-crafted offer is Saturday at 5 p.m.

The bondholders still represent the pivotal factor, and the most difficult to predict.

“The bondholders are such a diverse group. It’s kind of like herding cats,” observed a source familiar with the discussions. “The government required 90% to agree. There’s no way to do that. With the increased percent of ownership, better than half are lined up. That’s an improvement from 30%.”

He said that leaving these decisions to the mercy of the bankruptcy court “could have been a whole lot worse.”

Despite the union’s positive spin, retirees are getting hit hard under terms of the new VEBA package. They’ve lost their dental and vision benefits and coverage to drugs such as Cialis and Prilosec.

“If things turn around by 2011, almost everything is up for revisiting,” he noted. “This is a living agreement.”

A tentative agreement was reached Friday between GM and Magna International Inc., a Canadian auto parts supplier and manufacturer, for the sale of GM’s Opel division. A Russian automaker is said to be taking a stake in the deal.

Also on Monday, GM is expected to name 14 plants it plans to idle or close. Three assembly and stamping plants are expected to be maintained on idle status.

GM announced Friday plans to build a new small car — 160,000 per year–at one of its idled U.S. stamping and assembly plants that can product both small and compact vehicles. The new model would boost GM’s production level beyond 70% by 2013 from the current 67%.

UAW workers will staff the plant, a condition that is part of the GM/UAW agreement approved by the union.

The location of the plant was not disclosed, but a source familiar with the discussions said GM’s Spring Hill, Tenn., facility, originally a Saturn plant, is the likely site.

Spring Hill currently produces the Chevy Traverse, a sister car to the crossovers in production at GM’s state-of-the-art Delta Township plant in Lansing, Mich. Delta Township produces three crossovers: GMC, Saturn and Buick.

Copyright 2009 The Business Journal, Youngstown, Ohio.

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