GM Reaches UAW Agreement, Lenders Await

One minor step for GM, yet in the right direction. The American manufacturer now operating with next week's sword over head has come to an agreement with the UAW, eliminating one of the obstacles which would have tripped it into bankruptcy.

The agreement states that the retiree trust will be financed by the manufacturer, yet some sources say the UAW agreed for the financing to be half cash, half company stock. The deal still awaits to be voted upon by some 61,000 union workers, sometimes next week.

The race is not over though. Now, the battle ensues with GM's bondholders, which have to be convinced to accept a $27 billion debt (225 shares for every $1,000). The manufacturer has until Tuesday to do so, but we have already seen with Chrysler how fast things can go south. Still, the UAW deal might help built lenders' confidence.

"We have made it clear that our viability requires us to take these actions to restructure our operations and reduce the liabilities and debt on our balance sheet," GM spokesman Greg Martin was quoted as saying by The New York Times.

The lenders may turn out to be more of a road block than an obstacle for GM. It is required that 90 percent of them agree with the swap and analysts say this is unlikely to happen. According to the source, institutional lenders have already opposed the deal.

The US has plans to send GM into bankruptcy, to allow it access to some $30 billion in additional state aid. Although unconfirmed, this news is backed by GM's CEO, Fritz Henderson, who repeatedly said bankruptcy is the most 'probable" outcome.