Negotiators from General Motors Corp and the United Auto Workers were making significant progress on Saturday on a new labor contract, but major issues remained unresolved, a person close to the talks said.

GM and the UAW returned to the bargaining table in the morning for a third day of talks aimed at clinching a contract for the largest U.S. automaker.

The union agreed to extend its now-expired labor contract with GM on an hour-to-hour basis late Friday night.

That move stoked expectations the two sides were nearing a deal after eight weeks of bargaining and avoided the threat of an imminent and potentially crippling strike.

The negotiators were making good progress on some of the subcommittees or the bargaining teams formed to pore over the contract details, said the person, who requested anonymity.

A UAW local official said Saturday afternoon that negotiations continued but some news was expected shortly.

From what I hear it sounds like a settlement, not a strike, the official said on condition of anonymity.

The contract talks have hinged on GM's push to cut billions of dollars in health-care expenses by funding a new stand-alone trust fund to pay for retiree care.

GM and UAW declined to comment on the talks, which will affect more than 73,000 hourly workers and almost 270,000 blue-collar retirees.

Negotiators agreed to break for five hours in the predawn hours of Saturday after a marathon bargaining session that began early Friday and brought GM Chief Executive Rick Wagoner into direct negotiations with UAW Chief Ron Gettelfinger.

Talks resumed at around 10 a.m. EDT/1400 GMT.

The UAW on Thursday singled out GM as its strike target, a term it had avoided in more collegial negotiations in 2003.

Rival automakers Ford Motor Co. and privately held Chrysler LLC signed contract extensions with UAW, clearing the way for their union-represented workers to continue working.


The Detroit-based automakers lost more than $15 billion in 2006 and have cut more than 80,000 jobs through buyouts driven by plant closings. Given the industry's weakness, analysts have viewed a strike as unlikely.

The last major UAW strike against GM was in 1998, when a 59-day walkout at two GM parts plants caused shortages that eventually shut down almost all of the automaker's assembly plants and caused sales to plummet.

GM never recovered its pre-strike U.S. market share of 31 percent and has lost about 7 percentage points since.

Wall Street analysts have been optimistic GM would clinch a deal to slash health care costs totaling $4.8 billion in 2006.

Membership in the UAW has dropped to about 540,000, just over a third of its peak in 1969, reflecting the toll foreign competition has taken on U.S. automakers.

Despite its waning size and influence, the UAW has historically negotiated pay and benefit packages considered the gold standard for organized labor in a U.S. economy where less than 10 percent of all private workers remain unionized.

Two union officials familiar with the UAW's stance said the union sought a job security guarantee in exchange for acceptance of the retiree health fund, known as a voluntary employee beneficiary association, or VEBA.

Such a fund would be set up with a one-time payment from GM and the two sides were sparring over how many billions of dollars the automaker would offer for such a fund.

But Gregg Shotwell, a veteran GM employee and UAW dissident, said the retiree fund would be a hard sell.

The UAW has lost credibility over job security, he said. Nobody believes it anymore.

(Additional reporting by David Bailey, Poornima Gupta, Ben Lamothe and Dave Rogers)