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Plans to cut GM debt as talks progress

GENERAL Motors Corp and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM's debt on Monday, a day before the auto maker detailed a new survival plan.

GM is seeking concessions from the UAW and creditors under the terms of its US$13.4 billion federal bailout and faced a deadline yesterday to submit a restructuring plan to the government showing how it can cut costs and pay back the loans.

GM was not expected to reach detailed agreements by the deadline but talks with both key groups made progress in the final day, people briefed on the discussions said.

GM's board convened via a conference call on Monday to review a draft of the document, which is also set to detail plans for closing excess plants and selling laggard brands like Hummer, Saab and Saturn.

Facing the same deadline yesterday, GM's smaller rival Chrysler LLC was locked in negotiations with the UAW. Those talks were making progress after stalling out over the weekend, people briefed on those parallel talks said.

In a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some US$28 billion in debt for equity in a document submitted to the auto maker, according to a person with knowledge of those talks.

GM has not accepted those proposals, which were designed to discourage bondholders from dropping out of the deal in order to maximize its chances for success, the person said.

The debt swap is a crucial element in the restructuring plan for GM, which has received US$9.4 billion in government aid. A White House aide said that another US$4 billion in aid would be released as planned yesterday ahead of the deadline.

Without a deal on how to cut GM's debt, analysts have said the government would soon face a dilemma.


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