GM and UAW settle strike

By Kevin Krolicki and David Bailey

DETROIT (Reuters) - The United Auto Workers union and General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) struck a groundbreaking deal on Wednesday, ending a two-day strike by agreeing to create a health-care trust fund that will reduce the automaker's costs.

The agreement allows GM to shift more than $50 billion of retiree health-care liabilities to an independent union-aligned trust -- a breakthrough expected to allow Detroit automakers to cut in half a labor-cost gap against Japanese competitors.

News of the tentative four-year pact, which ended a nationwide walkout by 73,000 GM employees on Monday, sent GM shares up almost 9 percent to their highest level in 10 weeks.

GM plants went back into operation on Wednesday afternoon. The abbreviated shutdown cut some 25,000 planned vehicles, a brief work stoppage that analysts said may have been beneficial to the top automaker by allowing it to trim inventory levels.

UAW President Ron Gettelfinger, speaking to reporters at the union's Detroit headquarters, said the first national strike against GM since 1970 had helped secure the tentative deal that will face ratification as soon as this weekend.

Gettelfinger said he was confident a majority of GM's workers would vote in favor of the new contract.

The deal will provide job security for the union in exchange for reforms that will cut GM's fixed costs and free up money for investment in new vehicles, people briefed on the deal have said.

Details of the pact were not made public by either side. The Detroit newspapers said the contract included sharply lower second-tier wages and signing bonuses in addition to the trust for health care.