GM reach agreement with UAW

The last of the three automaker has finally reached an agreement with UAW  after its obligations to fund retiree healthcare has proven to be detrimental to the operations of the firm.  The agreement would see the $20bn obligations reduced, but whether it get cuts in half as GM wishes is yet to be seen when the details are released later on.  Local leaders will know of details by May 26th.

From the WSJ:

The agreement is a key element of GM’s plans to restructure its balance sheet under close watch of the Obama administration as it heads toward an increasingly likely bankruptcy filling by June 1.

General Motors hopes to pay half its obligations in cash while giving UAW some 39% stake in the restructured firm; around 522,000 retirees stand to benefit.

Lastly from Bloomberg:

Union retirees will have to give up coverage of dentist visits and some prescription drugs such as Pfizer Inc.’s Viagra, people familiar with the talks had said.

If everyone was saying that GM was headed towards bankruptcy right from the start, and that is becoming so much truer by the minute, I wonder why the government didn’t budge and step back from bailing them out? Was it the same reason that the banks were bailed out? All in the name of preventing market panic and containing systemic risks? Or did the government just wanted to buy some (expensive) time? Whereas if GM files for bankruptcy next month, the markets and investors could easily shrug it off (after all they have been given months to price things in). That against allowing them to file months before when things still were a lot shakier?


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