The United Auto Workers union has ratified a package of concessions designed to reduce General Motors' labor costs, completing a key piece of the automaker's massive restructuring effort.
UAW President Ron Gettelfinger said at a news conference Friday that 74% of GM's 54,000 U.S. production and skilled-trade workers voted in favor of the deal.
The vote comes before an expected Chapter 11 bankruptcy protection filing by GM GM on Monday. Bankruptcy experts say having the labor agreement in place will help move the process through court more quickly.
"We accept what it is and did the best we could," Gettelfinger said. "We've given a lifeline to GM until they can rebound."
UAW leaders agreed to the revised contract last week that freezes wages, ends bonuses, eliminates noncompetitive work rules and requires binding arbitration for the next contract if a deal can't be reached. Gettelfinger said there are some conditions under which the union could still strike. The UAW said the cuts would save GM $1.2 billion to $1.3 billion a year.
"We very much appreciate the support of our employees and retirees," Diana Tremblay, GM vice president for labor relations, said in a statement. "Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks."
The agreement also gives a union-run retiree health care trust 17.5% ownership of a post-bankruptcy protection GM, with a warrant to buy another 2.5%. The trust will take on the company's retiree health care costs starting next year. The stock will come in exchange for part of the company's $20 billion obligation to the trust.
The trust also will get $6.5 billion of preferred shares that pay 9% interest, plus a $2.5 billion note.
Gettelfinger said the union "didn't put a whole lot of emphasis" on the 2.5% warrants, which can be exercised when GM's value reaches $75 billion. The company's equity value currently stands at $683 million.
"We feel comfortable with where we're at with the 17.5%. We're comfortable with the preferred stock," he said. "We're basing everything else on reality."
GM has received $19.4 billion in loans from the U.S. government, which would get 72.5% ownership of the new company, perhaps sharing with the Canadian government. The remaining 10% would go to GM bondholders to wipe out $27 billion in unsecured debt.
Bondholders have until 5 p.m. ET Saturday to accept or reject the stock-for-debt offer, under which they would get a warrant for an additional 15% of the new GM's stock.
Existing GM shareholders would be left with little or nothing, and GM shares fell 32 cents, or 29%, to 80 cents in afternoon trading. They fell as low as 75 cents earlier Friday, their lowest level since the Great Depression.
Plans are for GM to emerge from bankruptcy with lower labor costs, far less debt and with fewer factories, brands, models and dealerships.
Even workers at factories in Spring Hill, Tenn.; Pontiac, Mich.; and Orion Township, Mich., that are under discussion for possible closure approved the deal.
"I believe that our membership understands. They get it," said Ray Wood, president of a UAW local at a Toledo, Ohio, transmission factory that voted 78% in favor of the deal.
On Monday, GM is to identify 14 assembly, parts stamping and engine and transmission factories that it plans to close as part of its restructuring plan, cutting 21,000 jobs.
Gettelfinger said GM is "getting close" to finalizing which plants will close. He said four of GM's plants slated to close will remain on "standby" with the hopes that vehicle sales will rise, creating greater demand.
GM announced earlier Friday that one of those 14 plants would be retooled to make subcompact cars starting in 2011.