The United Auto Workers union has reached a tentative deal with the government and General Motors Corp. that would cut labor costs and change the way a union-run trust for retiree health care is funded.
The union announced the deal in a short statement issued Thursday that gave no details, which were withheld pending meetings with members to explain the terms.
The move is a key step toward GM's efforts to restructure outside of bankruptcy court. The company, which has received $15.4 billion in federal loans, faces a June 1 government-imposed deadline to restructure or be forced into bankruptcy protection.
A big hurdle remains. GM needs bondholders who hold $27 billion in unsecured debt to forgive what they're owed for an equity stake in the company. Analysts have said it is nearly impossible that the required 90 percent of bondholders will agree to the offer.
Union members still have to vote on their deal, according to the UAW's statement. It makes no mention of factory closures or production of vehicles outside the U.S., items that the union has protested in Detroit and Washington as the deadline approaches.
GM plans to close 16 more factories, costing 21,000 hourly workers their jobs, as it tries to cut labor costs and shrink its manufacturing footprint to match lower demand for its products.
The Treasury Department, which has been overseeing GM's restructuring efforts, had no immediate comment. A message was left for a GM spokeswoman.
GM has about 61,000 hourly workers in the U.S. but plans to take that number down to 40,000 by 2010.
The Treasury Department's auto task force had pushed for the union to take GM stock in exchange for 50 percent of the $20 billion the company must pay into the trust, called a voluntary employees beneficiary association.
UAW officials have said the union's agreement with Chrysler reached last month will serve as a template for any deal with GM, but some differences had to be worked out.
At Chrysler, the UAW agreed to take 55 percent of the company's stock in exchange for roughly $6 billion of the $10.6 billion that Chrysler owes the retiree health care trust.
GM has said it is negotiating to give the UAW about 39 percent of its stock in exchange for roughly half the $20 billion it owes to the trust. Half the stock would go to the government, with 10 percent going to bondholders in exchange for wiping out $27 billion in GM debt. The remaining 1 percent would go to current shareholders.
Bondholders have resisted the 10 percent offer, saying they're getting too little for the amount of money they are owed. The offer expires Tuesday but could be extended.
A spokesman for a committee of GM's bondholders had no immediate comment on the union agreement.
If its bond exchange offer goes through, GM plans to issue 62 billion new shares and then do a 1-for-100 reverse stock split. The whole deal would severely cut the value of GM's existing shares.
Also under the Chrysler deal, workers will no longer get most of their pay if they are laid off and placed in the controversial "jobs bank." Instead, they will get a smaller amount of pay from the company to supplement state unemployment benefits. Cost-of-living pay raises also were suspended through 2011, and a provision was added for binding arbitration on a new contract through 2015.
The union also agreed to consolidate nonskilled labor job classifications into a team concept at all factories. Performance and Christmas bonuses will be suspended this year and next to help pay health care costs.
Ford Motor Co., which is not receiving government support, agreed in February to a revised contract with fewer concessions than the Chrysler deal. But the company has said it does not want to be at a disadvantage to its Detroit competitors, so it may eventually reopen negotiations with the union.
GM shares rose 15 cents or 10.3 percent, to $1.60 in afternoon trading.