GM pledges some $210 million to American Axle

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GM pledges some $210 million to American Axle

Posted Wednesday, Aug 19, 2009, 12:23 pm in Employee News

General Motors Co. pledged as much as $210 million in financial support to American Axle & Manufacturing Inc. in a deal that could help the auto supplier avoid bankruptcy and would give GM an ownership stake in the Detroit-based supplier, the Detroit Free Press reported.

That will give American Axle more time to negotiate a deal with its lenders after it breached its loan agreements when its debt and interest payments ran too high, the paper said. A waiver on those loan breaches was scheduled to expire Thursday, but the lenders have extended the deadline until the end of August, the Free Press said.

However, American Axle will receive financial support from GM only if the supplier reaches a deal with its lenders, according to a Tuesday filing with the U.S. Securities and Exchange Commission. If American Axle can negotiate that deal, GM has agreed to pay the supplier $110 million to make up for payments GM couldn’t make as a result of its bankruptcy filing in June and to settle changes in contract terms between the companies, the story said.

According to the Free Press, GM also has agreed to loan American Axle as much as $100 million. That part of the deal would give GM the option to purchase 7.4 percent of the supplier’s outstanding shares, the paper said. If American Axle draws the entire $100 million loan, GM would have the option to buy another 12.5 percent of the company’s stock, giving GM a 19.9 percent stake in American Axle, a company formed from GM’s former parts plants, the story said. (Detroit Free Press)