GM and UAW settle strike

By Kevin Krolicki and David Bailey

DETROIT (Reuters) - The United Auto Workers union and General Motors Corp (GM.N) 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.

"We feel very confident it will be ratified," Gettelfinger said. UAW-represented GM workers "will be very, very pleased with the outcome of this negotiation and the job security that is associated with this," he said.

Investor attention has shifted to Ford and Chrysler LLC, next on the UAW's list for bargaining contracts to cover the US auto industry's remaining 107,000-plus unionized workers.

Gettelfinger said the UAW would bargain with Ford and Chrysler at the same time on deals expected to be patterned after the GM agreement. Those talks could resume as soon as Monday, a person familiar with the process said.

MORE COMPLEX THAN EVER

GM said the new contract would make the company more competitive and allow it to maintain a strong production presence in the United States after a restructuring that has cut 34,000 factory jobs and shuttered a dozen plants since last year.

"There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM-UAW relationship," GM Chief Executive Rick Wagoner said.

Analysts praised the deal as a crucial step to put GM on track to recover from losses of over $12 billion in the past two years and missteps that have cut the company's U.S. market share nearly in half to 24 percent over the past three decades.