General Motors Shares Up on Talk Delphi Near Union Deal

General Motors shares hit their highest point since February on optimism concerning its bankrupt auto parts supplier Delphi, which is reported to be nearing a deal with the United Auto Workers union that would provide a cash payout to Delphi workers in exchange for lower hourly wages.

GM would fund the program. An agreement could be completed within a week or so, helping Delphi to emerge from bankruptcy, according to a Detroit News report.

Representatives for GM and Delphi were not immediately available for comment. A Delphi settlement would remove a major uncertainty for GM, which next month begins its own contract talks with the UAW.

GM and other automakers will be seeking deep concessions intended to bring their labor costs in line with rivals such as Toyota Motor . The deal at Delphi would offer 4,000 UAW workers a cash payment in return for accepting lower wages that could range from $14 to $18 per hour, the Detroit News said.

The amount of the cash payment was not specified. Workers could also take the lump sum and accept early retirement or return to GM, the newspaper said, quoting people familiar with the talks. Delphi, which filed for bankruptcy in October 2005, has been in talks with its unions and GM over agreements needed to complete a recapitalization plan and emerge from bankruptcy.

The Troy, Michigan-based parts maker reached agreements with its unions and GM on buyouts last year that allowed about 20,000 U.S. unionized hourly workers to leave Delphi. Contracts covering the wages of remaining workers, and more recently hired replacements, have proved to be a bigger hurdle.

GM has estimated its financial exposure from the Delphi restructuring at $7 billion and said it could take a charge of $1 billion this quarter related to the costs of a settlement. The continuing impasse at Delphi has been seen as a major risk to GM since a work stoppage at the company, which remains GM's largest parts supplier, has the potential to shut down production at the automaker.

Analysts had expected GM to press for a resolution of the Delphi situation before the Detroit-based automakers begin a crucial round of contract talks with the UAW to replace a four-year contract expiring in September. Those talks are set to kick off in July. Executives from all three U.S. automakers have made it clear they are seeking sweeping concessions.

U.S. automakers pay their factory workers an average of about $73 per hour in wages and benefits, compared to just $44 per hour for the three major Japanese car makers operating plants in North America, according to industry data.

In the past, the Detroit automakers have agreed to costly labor contracts, but this time the car makers are united in believing they have no choice but to close the cost gap. One industry executive said the companies were resolved to move jobs overseas, changing the "footprint" of production, if they could not reduce their U.S. labor costs.