General Motors might not be forced into bankruptcy after all. A key showdown with the United Auto Workers over how to fund the union's pension obligations was resolved Thursday, though details were not immediately released.
Though GM might still be forced to declare bankruptcy June 1, the issue of the union's pension obligation apparently won't be the deciding factor.
In an agreement with the U.S. Department of Treasury and GM, the UAW has agreed to alter the terms of its contract with the automaker. Though details were not immediately released, it is believed the deal would be similar to the ones the Union signed with Ford and Chrysler.
The union would accept GM stock in place of cash to cover the pension obligations to future retirees. Under the plan proposed by GM, the union's trust fund would receive about 38 percent of the company's stock. The government would hold the majority stake in the automaker.
"Today's announcement is a positive development in GM's effort to restructure and become a strong, viable company going forward," an administration official said in a statement.
At least one major stumbling block to a final agreement remains. Bondholders, who loaned GM $27 billion as it struggled for its life, would come up short in the proposed agreement. Under the plan advanced by the Treasury Department, these investors — many of whom are individuals and other pension funds — would get only 10 percent of GM's stock, handing them a significant loss.
And the clock is ticking. GM has until May 26 to reach agreement with the bond holders and then until June 1 to propose a new restructuring plan, or face bankruptcy.
