GM, UAW talks progress, race toward deadline

By Kevin Krolicki

DETROIT (Reuters) - General Motors Corp and the United Auto Workers union were making progress in talks crucial to keeping GM out of bankruptcy, just hours from a deadline for the automaker to submit a survival plan to the U.S. government, people briefed on the talks said on Monday.

The two sides resumed negotiations Sunday on the central question of how the cash-strapped automaker will fund a trust for retiree health care after talks had broken off on Friday.

GM's board was scheduled to convene via a telephone conference call on Monday to review a draft plan of the automaker's viability plan due to be submitted to U.S. officials on Tuesday.

GM is seeking concessions from the UAW and debtholders as required under the terms of its $13.4 billion bailout.

Without a framework deal on how to cut GM's crippling debt load, analysts have said the Obama administration would confront a political and economic dilemma in the coming days.

A bankruptcy for GM could cost tens of thousands of jobs and topple parts suppliers and dealers just as the White House is focused on trying to pull the economy from the brink of a deeper recession

An expanded aid package for GM and Chrysler could cost taxpayers billions of dollars more and risk a stronger bailout backlash by voters worried by the mounting cost.

U.S. Rep. Thaddeus McCotter, a Michigan Republican, said in an interview the renewed progress in GM's talks with the UAW appeared to come after a breakthrough in parallel talks with GM's bondholders.

"There may have been a misunderstanding on the part of some of the bondholders of what bankruptcy would mean for them," said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate. "They will get this done."

McCotter has been an advocate for government support of the industry's turnaround.

The UAW and GM declined to comment on the state of the negotiations, which are seen as central to GM's effort to reduce its debt and operating costs.

'SCORCHED EARTH'

Even before GM's plan was finished, the automaker's European labor unions predicted it was doomed to fail.

The heads of GM's European Employee Forum urged a spin-off of the Opel and Vauxhall brands rather than the deep cost cutting they said GM was seeking under the plan, internally dubbed GM's "Renaissance" project.

"The implementation of the 'Renaissance' project in Europe will ultimately lead to a collapse of Opel/Vauxhall," the statement said. "This means scorched earth will be left in Europe with major conflicts all the way to the end."