Per UM's Twitter:
Butt was Michigan's best option to be a catchy-blocky tight end so this is Not Good.
I wouldn't automatically count him as a redshirt; recovery from ACL tears these days is really fast, though not guaranteed to be. FWIW Jake Ryan tore his on March 20 last year and made it back in late October. If Butt can recover at Ryan speed he'll be back for the conference games.
Either way the intervening months were going to be especially important for Butt to get comfortable in the offense and gain the requisite weight to get beyond the largely Just a Receiver™ role he played last year. Likelihood of Ian Bunting's shirt being burned just shot through the stratosphere, since extant options are A.J. Williams and Khalil Hill.
Silver lining: MORfleet? Fortunately Nussmeier seems to be much less reliant on TEs, going 3- and 4-wide quite often at Washington, so this can be mitigated somewhat by more slot receiver sets.