New York - General Motors shares dropped below 1 dollar on Friday as the country's largest carmaker nears bankruptcy, while GM's top labour union ratified a deal that could speed up the expected court process. With the US government expected to take over more than 70 per cent of the Detroit-based manufacturer, existing shareholders must reckon that the value will drop to zero. Shares were going for 85 cents on Wall Street by Friday afternoon.
Intense negotiations with creditors continued against the looming Monday deadline - the date by which GM must show the federal government that it is financially viable or be forced into bankruptcy reorganization.
White House spokesman Robert Gibbs said the "deliberations and negotiations will continue" in the coming days and refused to say that bankruptcy was inevitable.
The United Auto Workers (UAW) union, meanwhile, said that 74 per cent of its members voted in favour of an agreement reached last week, which lowers worker salaries and benefits to levels equivalent with employee compensation at foreign-owned car factories in the United States.
The labour agreement could save GM about 1.3 billion dollars per year, according to the Bloomberg financial news agency, while the union health-care trust will hold a 17.5-per-cent stake in a reorganized GM when it re-emerges out of insolvency.
"This settlement agreement will give GM a chance to survive the worldwide collapse of industry sales and return as a viable company once the economy recovers," UAW President Ron Gettelfinger said.
GM would follow its smaller US rival Chrysler into bankruptcy. Chrysler hopes to emerge from the process as early as next week, effectively under the control of Italian carmaker Fiat.
"I think Chrysler certainly ... is a hopeful example for General Motors," Gibbs said.
Giving a glimpse of future plans as it adapts to the need for more fuel-efficient vehicles, GM on Friday announced it would retool a mothballed US factory to produce a new, small model to add to its fuel-efficient fleet, which includes Chevrolet's future Cruze and Volt models.
Plans call for annual production of 160,000 vehicles from the reopened, retooled assembly plant, which could also handle compact cars.
GM's expected journey through bankruptcy protection will be the fourth-largest ever in US business history.
The company has already received 20 billion dollars from Washington to keep its head above water and is expected to require another 30 billion dollars. In exchange, the government is to get 72.5-per-cent ownership in the century-old company, which has lost its generations-long status as the world's largest producer to Japanese carmaker Toyota.
Creditors are being offered a combined 10-per-cent stake in the company with the right to buy another 15 per cent later, in exchange for giving up the 27 billion dollars owed them by GM. One group representing 20 per cent of the creditors has reportedly accepted the deal.
When the reorganization is completed, including the impending sale of GM's European Opel concern to Canadian car parts manufacturer Magna, GM's workforce is expected to drop another 35,000 workers to a total of 200,000 remaining employees with the closure of another 14 assembly plants - or about half its head count from a decade ago.
Through bankruptcy, the new GM company is to throw off the debt weighing down its ability to streamline production and workforce and develop newer, more fuel efficient cars being demanded by North American drivers.
GM has lost 88 billion dollars since 2005.
Demand for new cars has plummeted more than 35 per cent since October amid a deepening recession in the United States. The domestic car industry has suffered massive losses as a result but was already stumbling due to building less efficient vehicles that couldn't compete with foreign rivals.
