06.02.09

GM Bankruptcy Process

• Yesterday, President Obama announced that GM has filed for Chapter 11 Bankruptcy in New York City. That bankruptcy filing is intended to provide an avenue for quick court approval of various restructuring agreements reached between GM, the UAW, the United States Treasury and other GM creditors. The following describes the main features of those agreements and the coming process for court approval.
• On May 29, the UAW membership ratified agreements that contain adjustments to the contract and modifications to retiree health care.
• These new labor agreements are part of the overall agreement with Treasury. As part of these agreements, the Treasury Department will provide $30 billion in additional financing to GM, on top of the $20 billion that Treasury has already provided. The Canadian government is also providing additional financing.
• The overall agreements include many components -- the new government loans, continuation of the pension plans, the labor agreement modifications, the new retiree medical agreements, and agreements with various other creditors of GM, including representatives of the majority of GM’s bondholders. The UAW is a full partner in this process and is supporting all these agreements.
• As part of the agreements, a new company will be formed which will receive GM’s operating assets. Treasury will receive roughly 60% of the stock in the new company in exchange for the government loans.
• Under the proposed agreements, the pension plan covering UAW members will continue in effect without change. The trust fund that will provide retiree medical benefits will receive 17.5% of the stock in the new company, along with $6.5 billion in preferred stock and a new Note with a face value of $2.5 billion.

Bankruptcy Process

• The bankruptcy petition was filed yesterday morning in New York.
• The UAW has hired bankruptcy experts from two New York law firms who are working with our in-house lawyers to represent the UAW and our retirees in the bankruptcy proceedings.
• Yesterday afternoon, the Bankruptcy Judge approved a variety of motions to allow GM to continue to operate in the ordinary course of business while the process continues. Wages, vacation pay, pension benefits, health care benefits and all other employee benefit programs for UAW members will continue without change (in accordance with the ratified modifications) during the process.
• The Bankruptcy Judge also approved a request to move forward very quickly to consider approval of all of the proposed agreements, including establishing the new company, the retiree medical benefit agreements and the terms of the additional government loans. A hearing to consider those items has been scheduled for June 30.
• Tomorrow, the Bankruptcy Court will be holding a "formation meeting" for the Creditors Committee. The UAW will seek a seat on that Committee.
• As part of the court approval process, a mailing will be sent to all UAW GM retirees and surviving spouses within the next week. That mailing will include a notice from the court and a letter from UAW President Ron Gettelfinger and UAW Vice President Cal Rapson.
• That letter will describe the proposed retiree medical agreements, which are fully consistent with the new labor agreements ratified last week.
• Retirees will have the right to submit objections to the proposed agreement if they wish. The process for objections and for obtaining full legal documentation of the proposed agreements will be described in the notice that retirees will receive in the mail.
• Retirees do not need to take any action now. The UAW supports court approval of these agreements. We are not asking retirees to file objections. If the Bankruptcy Court approves the agreement, retirees will receive more detailed information about the new benefit program in the coming weeks.
• While this process is developing in the Bankruptcy Court over the next few weeks, there will be no changes to medical benefits.