$7.5 billion bailout for GMAC as GM and UAW reach tentative agreement over new contract

May 21, 2009

(ChattahBox) — It was announced today that GMAC has gotten another $7.5 billion in rescue funds from the government, aiming to prop up the troubled lender.  GMAC had already received about $6 billion from the government under the Troubled Asset Relief Program, or TARP. Treasury’s $7.5 billion investment in GMAC will be made in the form of 9 percent Mandatorily Convertible Preferred Interests. It signals the Obama administration’s commitment to secure financing for customers and dealers of General Motors Corp. and Chrysler LLC, two of the country’s three biggest automakers.
GMAC is the main source of financing for General Motors customers and was recently selected by the Obama administration as the main lender for Chrysler. Of the infusion, $4 billion is to support GMAC’s anticipated growth in Chrysler dealer and retail loans. while the remaining $3.5 billion is intended to fortify GMAC capital shortages identified as part of “stress tests” conducted on 19 of the largest banks.

Meanwhile the United Auto Workers union said Thursday it had reached a “tentative understanding” with General Motors and the US Treasury on contract changes aimed at averting bankruptcy. The announcement came as GM was scrambling to get concessions to prove its viability as a deadline approached for a cutoff of government aid and a likely bankruptcy filing, June 1st. The automaker is still struggling with a crushing debt that may drive it into a Chapter 11 bankruptcy reorganization.  Bondholders are expected to resist the company’s offer to take 10 percent of its stock to wipe out $27 billion in unsecured debt.

The changes to the GM pact are believed to be similar to the concessions the union has already approved in earlier negotiations with Chrysler and Ford.  The UAW said the agreement, which requires member ratification, would modify the 2007 collective bargaining agreement with GM and also modify a trust fund that covers health care, mainly for GM retirees. The union would likely accept GM stock rather than cash to cover future retiree health care costs at the company. The UAW said it is withholding details until it schedules and conducts explanatory and ratification meetings for members, which it needs to complete before the June 1 deadline imposed by the Treasury.


Comments

2 Responses to “$7.5 billion bailout for GMAC as GM and UAW reach tentative agreement over new contract”

  1. Joe Weber on May 22nd, 2009 8:20 am

    Too little too late. With a standard contract that is more than 2,000 pages with 28 just on job seniority rules, it looks like the horse is already out of the barn.

    http://www.youtube.com/watch?v=R6qTJXBppeQ

  2. Pages tagged "tentative" on May 28th, 2009 9:37 am

    […] bookmarks tagged tentative $7.5 billion bailout for GMAC as GM and UAW reach … saved by 4 others     metalskater2 bookmarked on 05/28/09 | […]

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