GM Generali

(Adds comments from Gettelfinger and GM, updates stock price)

 
   DOW JONES NEWSWIRES 
 

The United Auto Workers union said it overwhelmingly ratified its new labor agreement with General Motors Corp. (GM), getting the auto maker over a major hurdle in its restructuring plan.

UAW President Ron Gettelfinger said the plan was passed with 74% support and will take effect at 4 p.m. EDT.

He also said some currently idled GM plants will reopen when the moribund auto market rebounds, while stressing he expects GM pensions to remain safe while the company is in bankruptcy and that the new labor deal would benefit the union during that time.

GM, which is surviving on federal loans, is racing to restructure by June 1 under the close watch of the Obama administration. It is widely expected the company will follow rival Chrysler LLC into bankruptcy protection Monday under a plan that would give the U.S. government a 72.5% stake. The U.S. will boost its support for GM by as much as $50 billion and keep it closely held for up to 18 months.

Diana Tremblay, GM's chief negotiator, thanked the union members for their vote, saying, "Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks." She added the deal "will enable GM to be fully competitive and has eliminated the (wage and benefit) gap with our competitors."

The deal gives the union's independent trust fund for retiree health care a 17.5% stake in the new GM and warrants for another 2.5% stake. Gettelfinger has said the union accepted a smaller stake than it wanted to ensure the deal would be completed. In exchange, the UAW will get $6.5 billion in preferred stock and a $2.5 billion note. The union will also get one representative on GM's board.

Gettelfinger said GM's cash-flow savings will be $13 billion from the Voluntary Employees' Beneficiary Association, which will fund retirees' health care. The union is assuming those costs starting next year and GM had agreed to fund the $35 billion plan.

As part of the pact, the auto maker agreed to make subcompact cars in the U.S., rather than China or South Korea. GM announced plans earlier Friday to build such vehicles at a to-be-determined idled plant, spending $600 million to $700 million in the process, said people familiar with the plan.

Other terms of the pact were said to largely mirror concessions the UAW granted Chrysler LLC last month, including a suspension of cost-of-living allowances, bonuses and some holidays, according to people familiar with the situation.

The union presented the pact to 60,000 GM workers Tuesday. About a third of those employees will lose their jobs under GM's restructuring plan.

Earlier Friday, GM took another step in its restructuring with a tentative deal to sell its European brands to Canadian auto supplier Magna International Inc. (MGA). But closing that deal will require some help from the German government.

GM shares were recently down 33% at 76 cents. The stock will likely become worthless if a bankruptcy filing takes place.

-By Jay Miller, Dow Jones Newswires; 201-938-2331; jay.miller@dowjones.com

(Sharon Terlep contributed to this story)