GM to make deep cuts, Chrysler and UAW cut deal

General Motors announced, April 27, plans to shut down plants, lay off workers, cut the number of its dealerships in half and eliminate its Pontiac division to meet government insistence that it fundamentally “restructure.”

The announcement came a day after union leaders said they had reached an agreement with Chrysler that meets federal requirements for the automaker to receive additional financing. Fiat, the Italian automaker, participated in making the deal. Chrysler was, in effect, ordered by the government to merge with Fiat before it could receive additional financing.

Neither the UAW or the company would discuss details of the agreement, which, sources say changes the 2007 contract in the company’s favor and cuts the amount of money Chrysler will pay into the newly created health fund for retirees.

Officers at UAW locals will get there first chance to review the amended labor contract late today. Then the agreement will be discussed by the union’s Chrysler Council which is made up of officials from union locals at Chrysler plants. The contract amendments they will examine are said to clear the way for $6 billion in additional federal loans. The company has borrowed $4 billion so far.

By April 30, a simple majority of rank-and-file UAW members must approve the revisions to the Chrysler contract.

In other auto industry developments, newly proposed cuts at GM speed up proposed cuts presented to the Obama administration that were rejected as too small and too gradual when it forced out former Chief Executive Rick Wagoner.

GM, which last week took $2 billion of emergency government loans, bringing its total to $15.4 billion so far, was told by the administration last month to cut more and faster for continued financial help.

GM in the United States will focus on four main brands: Chevrolet, Cadillac, Buick and GMC. The latest cuts, when added to those already proposed last month, will total $23.2 billion.

The total number of plants in the U.S. will be cut from 47 to 34 and the hourly work force will be cut by 21,000 workers. The number of dealerships will drop from 6,246 to 3,605.

Chrysler, even with its new agreement, will seek bankruptcy protection. The scenario was mapped out with government help and, according to sources, includes “safeguards” designed to protect workers’ benefits.

The plan is for a new company to be established with the “best” assets of Chrysler. Fiat will own a fifth to a third of the new Chrysler and the U.S. government will also hold a significant stake. A portion of the equity in the new company will be given to Chrysler’s creditors as repayment.

Although no-one would comment officially for the union, the UAW had said, before the agreement, that any new deal would have to protect workers’ pensions, even with a bankruptcy filing.