GM, Chrysler Labor Talks Slow as Deadline Looms

Concession talks between the United Auto Workers and the Detroit Three shifted into an odd phase Saturday as negotiations broke off with General Motors Corp., slowed at Chrysler LLC and picked up speed at Ford Motor Co., financially the healthiest of the three, according to people briefed on the bargaining.

The developments come as GM and Chrysler race toward a Tuesday deadline to submit plans to show the government how they will become viable and repay billions in loans that are keeping them alive during the worst auto sales slump in 26 years.

Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.

The Treasury Department has committed to giving GM a total of $13.4 billion if the automaker's plan is approved. GM's plan, however, will raise the possibility that more government loans may be needed, as sales in overseas markets have deteriorated worse than expected, according to a person briefed on the plan.

That means GM may seek another $5 billion, raising the loan amount to about $18 billion, the amount that GM sought when it made a presentation to Congress in December. The company will discuss bankruptcy in its plan but will emphasize using loans to get through the sales slump, said the person, who spoke on condition of anonymity because the preparations are private.

Top executives of Chrysler and GM have said bankruptcy is not an option for automakers because people will not make big-ticket purchases from a company that may not be around. Bankruptcy may also lead straight to liquidation unless the government provides debtor-in-possession financing.

Detroit-based GM is living on $9.4 billion in government loans, and the Treasury Department must approve its viability plan for it to get $4 billion more. Chrysler has received $4 billion in government loans and wants an additional $3 billion.

The conditions of the loans require the automakers to get concessions from their unions, debtholders, dealers and others, to help the companies become viable.

On Friday night, union negotiators walked out of talks with GM in a dispute over funding of a union-administered trust that will take over retiree health care expenses next year, a person briefed on the talks said Saturday.

At Chrysler, talks have slowed considerably, but the union is negotiating heavily with Dearborn-based Ford, according to another person briefed on the talks. Neither person wanted to be identified because the talks are private.

In past national contract talks, the UAW has at times negotiated with the healthiest of the three automakers, agreeing to terms that serve as a pattern for the other two.

But these talks are far different. GM and Chrysler are the only automakers that took government aid and face Tuesday's deadline, even though Ford CEO Alan Mulally has said he expects his company to get the same concessions as the automakers so that it isn't left at a disadvantage.

At GM, UAW negotiators walked away because the company made demands that were "detrimental to retirees and the ability to provide health care," according to the person briefed on those talks. The person didn't know further details.

GM spokesman Tony Sapienza would say only that GM is working on its viability plan.

"We're committing to meeting the goal of providing a plan as required by terms of the restructuring plan," he said Saturday.

A spokesman for the UAW did not immediately respond to a request for comment.

Under terms of their loans, GM and Chrysler must aim to make at least half of its contributions to their health care trust funds in the form of equity instead of cash.

GM says it owes $20.4 billion to its fund, which would take over health care payments for GM's roughly 500,000 blue-collar retirees and spouses next year.

The trust would let GM move about $46.7 billion in retiree health care costs off its books, making it more cost-competitive with Asian automakers. It is the key feature of a new four-year contract signed in 2007 with the UAW.

Auburn Hills-based Chrysler is obligated to pay about $9.9 billion into its retiree health care trust, and that would relieve the company of a $16 billion long-term liability.

The union has said that if fully funded, the trusts would provide health care to retirees for 80 years.

GM also must reduce its public unsecured debt by two-thirds and has been negotiating with bondholders to swap the debt for equity. The company said in a Jan. 15 presentation to analysts that it has $41.6 billion in debt.

Privately held Chrysler has about $9 billion in mostly secured debt held by banks and also is negotiating to swap some of that for equity.

Debtholders and the union are watching each others' negotiations to make sure one doesn't give up more than the other as the companies try to move forward at about the same pace, said two of the people familiar with the negotiations.

GM, Chrysler and their unions must also agree to reduce the companies' labor costs so they are competitive with Japanese automakers that have plants in the U.S.

The UAW already has agreed to end the "jobs bank" in which laid-off workers get about 95 percent of their pay.