GM, UAW settle in for long haul in talks

DETROIT (Reuters) - General Motors Corp (GM.N) and the United Auto Workers union could negotiate into next week after failing to produce a breakthrough on the thorny issue of health care costs, people briefed on the progress of the talks said on Thursday.

Negotiations between the two sides continued for a sixth day of overtime on Thursday, with local union officials reporting slow progress.

Given the complexity of the issues and the high stakes for both sides, the contract talks for 73,000 GM workers will likely continue at least into the weekend and could run longer, two people briefed on the discussions said.

The UAW's contract with GM was extended on an hour-by-hour basis after the previous labor pact expired just before midnight on Friday.

"Progress is very slow," Al Benchich, president of Local 909 in Warren, Michigan, said in a message posted on the local unit's Web site on Wednesday evening.

One local union official told members that financial experts had been brought in on Tuesday.

"Outside financial consultants were brought in (Tuesday) to look at all the numbers and funds," Enrique Flores Jr., president of UAW Local 276 in Grand Prairie, Texas, said in a message on the unit's Web site. "The financial consultants will be going over the finances for a while."

He added that negotiators were making some progress, but talks were moving "real slow."

The UAW has retained investment bank Lazard as an adviser, bringing back the firm that helped the union negotiate mid-contract concessions with GM in 2005.

For GM, key issues include cutting health-care costs and establishing a "two-tier" wage system that would allow the automaker to cut wage and pension costs as its aging work force retires, people familiar with the talks have said.

To offset those concessions, the UAW has sought job security guarantees and a substantial signing bonus for the 73,000 GM workers it represents, according to these people, who asked not to be named because they were not authorized to discuss the private talks.

The outcome of the contract talks is seen as crucial to efforts by the three Detroit-based automakers -- GM, Ford Motor Co (F.N) and Chrysler LLC -- to recover from combined losses of $15 billion last year and sales difficulties that have driven their share of the U.S. market below 50 percent.

Representatives from the UAW and GM have declined to comment on the content of the private talks.

In a development that could deliver deeper savings for GM but threatened to complicate negotiations, GM floated the idea of a health-care trust that would cover both active UAW-represented workers and some 540,000 retirees and spouses, a person familiar with the proposal told Reuters on Wednesday.

Previously, the talks had focused on the narrower issue of retiree care, representatives of both sides have said.

Since talks started two months ago, negotiations have hinged on how fully GM should be required to fund a special trust -- known as a voluntary employee beneficiary association, or VEBA -- in exchange for clearing an unfunded liability estimated at about $50 billion from its balance sheet.

In addition to job security guarantees, the UAW is seeking a signing bonus for its members as a sweetener to help clinch ratification of a contract expected to include concessions elsewhere, people familiar with the talks have said.

The job security issue is pressing for the union because several GM assembly plants in the United States face an uncertain future as the automaker restructures. Local union officials also say the contract should prevent GM from outsourcing production overseas.

GM, for example, has not said what it plans to do with a plant in Lordstown, Ohio, now making the Chevrolet Cobalt and Pontiac G5 when those models are replaced after the 2009 model year. That plant employs 2,600 workers.

UAW President Ron Gettelfinger and Vice President Cal Rapson, who are leading the union negotiations with GM, cautioned earlier this week the union would set a firm deadline for talks to conclude if progress stalled.

Before the talks began, GM, Ford and Chrysler said they were seeking sweeping concessions from the UAW to close a cost gap with Toyota Motor Corp (7203.T), which they say amounts to more than $30 per hour for the average factory worker.