UAW: Bondholders Stalling Deals With GM, Chrysler

A top United Auto Workers official is accusing lenders to General Motors Corp. (GM) and Chrysler LLC of stalling a debt-swap deal needed to win more federal aid.

In a letter sent this week to U.S. lawmakers, UAW legislative chief Alan Reuther says bond holders and other lenders are resisting terms set by the U.S. government when it extended emergency loans to General Motors Corp. and Chrysler LLC.

The companies are asking for up to $21.6 billion in additional loans, and face a March 31 deadline to cut deals with the union and bondholders.

Reuther also argued that retired hourly auto workers should be spared from further sacrifices.

The letter is the latest salvo in a three-way tug-of-war between the union, auto makers and their bond holders over eliminating billions of dollars in debt from the companies' balance sheets.

Negotiations with both groups have stalled as each accuses the other of refusing its fair share of concessions.

"UAW active and retired members have already stepped up to the plate and made sacrifices to help the auto maker restructure," Reuther said in the letter, dated March 16 and addressed to members of Congress and the Senate. "Unfortunately, bondholders and other lenders are still resisting the restructuring targets set forth in the Treasury loan agreements."

GM, under the loan deal, is required to cut a deal with bondholders to swap about two-thirds of the company's $27 billion in debt for equity in a restructured GM.

The union is being asked to accept half of $20 billion GM owes to cover retiree health care in the form of equity rather than cash.

A group representing GM bondholders has argues they are being asked to take a deeper cut than the union. In a statement this week, the group said it had presented GM with a framework of a deal that would have met government stipulations.

The union says its members have accepted many costly givebacks over the years, including concessions agreed to last month as part of amended labor deals between the union and Detroit's auto makers.

Retirees, Reuther said, have been forced to take no additional health care costs over the years.

The UAW granted Ford Motor Co. (F) similar concessions to GM and Chrysler even though the company isn't asking for federal aid.

Chrysler's loan terms have not been made public because the company is privately held.

-By Sharon Terlep; 248-204-5532; [e-mail].