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Posts Tagged ‘bankruptcy’

General Motors Corp is hoping that a recent, but as yet uncompleted deal between Chrysler and the United Auto Workers can quickly be modified to meet its own needs, and GM’s Chief Executive Officer Fritz Henderson said yesterday on a conference call, “I would expect we’d be able to pick up the pace here in the next several weeks”.

Henderson, who became CEO after President Barack Obama caused Rick Wagoner to step down, added that he is waiting for Chrysler to settle with the United Auto Workers, “The UAW is actually negotiating with two companies today, and one company (Chrysler) has a deadline of thirty days, and one company (GM) has a deadline of sixty days”.

GM, which faces a June 1 bankruptcy deadline, has been trying since December to cut its $20.4 billion cash obligation to the health-care trust in half, and was told by the Obama administration in March that it needs to make far deeper reductions in its debts.

Chrysler and the UAW (United Auto Workers) are close to an agreement which would involve the company ceding an equity stake of about 20%, in exchange for reducing its obligations to a $10.6 billion medical fund.

Union leaders and automakers agreed in their 2007 contract talks to create the trusts, called VEBA (Voluntary Employee Beneficiary Associations), with the intention being that they would free the companies from future retiree health-care expenses, in exchange for upfront contributions.

The original VEBA agreement called for payments by GM of $32 billion, with the union assuming an estimated $47 billion in future health-care costs.

In addition, GM is trying to convince its bondholders to accept a cut in the value of their debt, and the latest plan is to make a formal offer before April 27, which would involve bondholders swapping their claims for equity.

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A report just out from the payroll giant, ADP (Automatic Data Processing) says that the drop in its Employer Services gauge was larger than the 663,000 jobs that economists had forecast, and was the most since records began in 2001. Its February’s reading was revised upwards to show a cut of 706,000 workers from a previous estimate of 697,000.

The figures were compiled by the forecasting firm Macroeconomic Advisers, using ADP payroll data from 400,000 businesses and it covered around 24 million workers.

The ADP report showed a reduction of 327,000 workers in goods-producing industries, and employment in manufacturing dropped by 206,000 whilst service providers cut 415,000 jobs.

A Labor Department report that is due out April 3 is expected to show that payrolls at companies and government agencies shrank by 658,000 in March, and that unemployment rose to a 25-year high of 8.5 percent.

Details in the ADP report show that companies which employed more than 499 workers reduced their workforces by 128,000 jobs; medium-sized businesses that employed between 50 to 499 employees, cut 330,000 jobs and smaller companies reduced their payrolls by laying off 284,000 people.

In related news, President Barack Obama says that he believes that a quick, negotiated bankruptcy is the most realistic and likely way for General Motors Corp. to restructure itself, and to become a competitive automaker. He also said that he is prepared to let Chrysler LLC go bankrupt and to be sold off piecemeal if it’s unable to form an alliance with Fiat SpA.

If GM files for bankruptcy it will mark the fall of a corporate symbol that in 1962 controlled 51% of the domestic car market, and in 2004 posted a $2.8 billion profit, after which it all went wrong and it posted losses of $82 billion in the last four years.

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