GM and UAW talks resume as deadline looms

DETROIT (Reuters) - Talks between General Motors Corp and the United Auto Workers were set to resume on Sunday with just two days to go before a deadline for the struggling automaker to submit a new restructuring plan to the U.S. government.

Union negotiators in Detroit walked away from the bargaining table on Friday over differences with GM over the central issue of how to fund retiree health-care costs.

But by Sunday afternoon, both negotiating teams were set to meet and resume talks, a person briefed on the situation said.

Meanwhile, GM and a committee of its bondholders were locked in high-stake talks aimed at reducing debt at the struggling automaker by about $18 billion (12.7 billion pounds).

If GM cannot win the deals it is seeking to cut its debt and costs, the automaker is certain to face new pressure to consider filing for bankruptcy or to plead for an expanded bailout from the Obama administration.

GM and Chrysler LLC, are required to submit restructuring plans by Tuesday showing how they can be made viable after receiving $13.4 billion in emergency federal funding that has kept them operating since the start of the year.

Both automakers say they expect to meet the cost-cutting and competitiveness targets set out under the bailout. UAW representatives could not be reached for comment.

A senior White House adviser said on Sunday that sweeping and shared sacrifices by creditors, labour and executives were needed to allow automakers to emerge from the current crisis.

"That's going to involve concessions on the part of everyone, not just the auto workers, but shareholders, creditors and, of course, the executives who run the company," President Barack Obama's senior adviser David Axelrod said on "Fox News Sunday."

A parallel set of talks between Chrysler LLC and the UAW has also been under way, but the smaller automaker had made little progress as of Saturday, a person briefed on those talks said.

GM debtholders on a 10-member committee, including Franklin Templeton Investments, Fidelity Investment and Loomis Sayles & Co, remain in talks spurred by a requirement that the automaker reduce $27.5 billion in debt to about $9 billion by exchanging the debt for equity.

A person involved in those discussions said they were likely to run to the brink of the Tuesday deadline as creditors press for more favourable terms.

GM has received $9.4 billion from the U.S. Treasury and has been promised another $4 billion more if it can demonstrate that it can be made viable by slashing costs and debt.

Like bondholders, the UAW is being pressed to accept stock in a recapitalized GM in exchange for debt forgiveness.

The UAW is owed roughly $20 billion from GM for a retiree health-care fund. It faces pressure from GM to take half of that in equity in a recapitalized company.

GM and the UAW agreed to create the retiree health-care fund as part of a landmark 2007 labour agreement. But the steep slide in auto sales in 2008 overwhelmed GM's attempts to raise cash on its own, leaving it unable to survive without federal loans and unable to fund its commitment to the union.

MARKET COLLAPSE

GM's U.S. sales dropped 23 percent last year and it remains under pressure after industry-wide sales plunged to a 27-year low in January.

Other aspects of the GM plan are expected to detail how it can lower its break-even point in a market expected to slump through 2009 with an only limited recovery beyond that.

GM will also discuss its relations with suppliers and has been in talks with its former subsidiary Delphi Corp about buying back some of its plants, according to a person involved in those talks.

Delphi, one of GM's largest suppliers, has been struggling to emerge from bankruptcy since 2005. By buying up some Delphi factories, GM could clear the way for the supplier to sell off other assets and would aim to end a long-running drag on its finances, the person said.

Under Chief Executive Rick Wagoner, GM has resisted suggestions that it would be better able to restructure under a court-supervised bankruptcy.

But in recent weeks, senior executives at the automaker have become more open to the prospect of a bankruptcy filing, a person involved in the talks has said.

A bankruptcy filing would allow GM to rework its contracts with creditors, the UAW, dealers and its suppliers. But it would also mean even steeper job losses. GM, Chrysler and Ford Motor Co have cut 250,000 jobs since the start of the decade and are looking to cut more.

Chrysler has received $4 billion in federal funding and is seeking another $3 billion.

Ford Motor Co, which is seeking a $9 billion line of credit from the U.S. government, remains in its own talks with the UAW intended to secure the same concessions the union grants to its rivals.

(Additional reporting by Walden Siew and Jui Chakravorty in New York, David Bailey in Detroit; Editing by Maureen Bavdek)