The United States government is readying to steer General Motors (GM) into bankruptcy with a plan to fund the ailing carmaker with tens of billions of dollars in extra public financing, the Washington Post said on Thursday.
Under the plan the car giant would get about $30-billion in extra federal loans, the newspaper said, citing unnamed industry sources. The move would push the company’s federal debt to about $45-billion.
The Post report comes as GM was scrambling to get concessions from the powerful United Auto Workers (UAW) union, as the June 1 deadline to prove its viability approached, after which government aid would be cut off.
The UAW said on Thursday it had reached a “tentative understanding” with GM and the US Treasury on contract changes aimed at averting bankruptcy.
A GM bankruptcy would swiftly come on the heels of fellow carmaker Chrysler’s bankruptcy filing, with the administration of President Barack Obama taking on drastic measures to force the carmakers to restructure.
Fears that a bankruptcy would prompt business failures throughout the country are rampant for GM suppliers, the Post said.
The UAW said it would want ratification complete before the June 1 deadline imposed by the Treasury, meaning the company and the union had to come to terms this week.
The changes to the GM pact are believed to be similar to the concessions the union has already approved in earlier negotiations with Chrysler and Ford.
GM is currently funding its operations with more than $15-billion in emergency government loans.
In late March, Obama gave GM another 60 days to come up with a “more aggressive” cost-cutting plan to keep government funding and avert bankruptcy. — AFP