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GM, UAW Optimistic as Talks Continue

Negotiators in lengthy contract talks between General Motors and the United Auto Workers returned to the bargaining table Sunday amid optimism that they were close to a settlement.

Two people who have been briefed on the talks said Saturday that bargainers reported progress toward an agreement on the linchpin of the talks, GM funding a union-run trust that would take over much of the company's $51 billion unfunded obligation to pay health care costs for retirees.

The people, who requested anonymity because the talks are private, said they were told negotiators are optimistic a tentative deal could be reached as early as Sunday or Monday. Any agreement would have to be ratified by GM's 73,000 UAW members.

GM spokesman Tom Wickham said the talks began midmorning Saturday, recessed Saturday evening and resumed Sunday morning. He would not comment on a potential agreement. UAW spokesman Roger Kerson also declined to comment.

The UAW picked GM as the lead company and potential strike target, so Ford Motor and Chrysler would likely match many of the terms of GM's agreement.

One of the people briefed on the talks said early Saturday the two sides had not agreed on how much GM would have to kick into the trust, called a Voluntary Employees Beneficiary Association or VEBA. Neither person knew if that had changed by late Saturday afternoon.

"They said they were real close," one of the people said.

Erich Merkle, vice president of auto industry forecasting for consulting company IRN Inc. in Grand Rapids, said the trust fund is important to closing the U.S. automakers' labor cost gap with their Japanese competitors. The Detroit Three say the gap is about a $25 per hour including wages, benefits and retiree health care costs.

But an agreement on the trust alone isn't enough for the company because competitive disparities remain in areas other than retiree health care, Merkle said.

The U.S. companies still pay workers most of their salaries when they are laid off, and they still in many cases pay UAW wages and benefits for janitorial, landscaping and cafeteria workers, items that Japanese automakers contract out for less money, Merkle said.

"The market just isn't going to support inefficiencies. Either the UAW, they can pick up health care and they can help GM out here, or they can let the market take care of things later," Merkle said. "When the market corrects the situation, it's going to be brutal. It's a bankruptcy situation."

GM, which has about 540,000 UAW retirees and spouses, badly wants to pay the union to form the VEBA to get the health care liabilities off its books. The UAW is seeking guarantees of new vehicles to be built in U.S. plants in exchange.

The structure of the trust and how the company would make its contributions is incredibly complex, said one of the people who had been briefed on the talks. Analysts say the contributions could be made in cash or stock.

Bargainers recently have been focused on other economic issues that hinge on the trust including pensions, wages, profit sharing, and who manufactures company parts, one of the people briefed on the talks said.

The talks have gone more than a week beyond the original deadline, but the union has extended its contract with GM hour by hour since the pact was set to expire at midnight Sept. 14.

Negotiators have settled noneconomic issues such as grievance procedures, according to the people who were briefed on the talks.

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