CNN Financial News Producer
With the World Health Organization calling the outbreak of swine flu a "public health emergency of international concern," stock markets around the world stumbled overnight and into Monday morning.
At a time when the global economy and financial system are already fragile, such a health scare will likely put the brakes on global travel and trade. The European Union, for example, is urging its citizens to avoid non-essential travel to Mexico and the United States in the face of the outbreak.
Meanwhile, airline and hotel stocks are tanking across the board on fears that a potential pandemic will cripple the global tourism industry.
And as you might expect, shares of the leading flu vaccine makers are getting a lift on the expectation that orders will increase.
Oil prices tumble
Crude oil fell more than 5% overnight as concerns about the potential economic repercussions of a swine flu pandemic weighed on the market and lifted the U.S. dollar.
Crude fell below $49/barrel in electronic trading this morning. On Friday, oil surged nearly 4% to settle at $51.55 a barrel.
GM goes for broke
General Motors today announced plans to cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40% of its dealer network in its latest bid to stay out of bankruptcy.
The new restructuring proposal will leave the Treasury Department, and as such U.S. taxpayers, owning a significant stake in GM. The Treasury will accept GM stock rather than cash for repayment of about $10 billion that the government has already lent to the automaker.
Trust funds controlled by the United Auto Workers union would also hold a significant stake in the company. Between them, Treasury and the unions would own 89% of GM.
GM also announced an offer to its bondholders to swap $24 billion of the company's $27 billion in unsecured debt for stock. GM is offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal.
CEO Fritz Henderson warned during a press conference today that bankruptcy is still very likely unless bondholders agree to the swap.
The moves are GM's latest efforts to cut costs and stem losses that have dogged its North American auto operations since 2005, and today’s news represents an additional reduction of 7,000 to 8,000 jobs beyond what GM disclosed in its previous viability plan back in February.
Chrysler wins concessions from UAW
Meanwhile, privately-held Chrysler cleared another major obstacle to its survival Sunday when it reached a tentative deal for concessions with the United Auto Workers union
The automaker is just days away from a government deadline to gain concessions from its unions and debtholders, as well as form an alliance with Italy's Fiat, or face almost certain liquidation.
The UAW said the agreement was reached with Chrysler, Fiat and the Treasury Department - and includes modifications to the union's 2007 collective bargaining agreement and the trust program dedicated to retiree health benefits.
The deal does not, however, guarantee that Chrysler will be able to avoid bankruptcy. It still needs to be ratified by the automaker’s rank-and-file union members. That vote is scheduled to take place Wednesday.
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