Under the direction of the U.S. Treasury, General Motors Corp is close to a deal with the United Auto Workers that would cut its hourly labor costs by more than $1 billion a year, the Wall Street Journal said, citing people familiar with the matter.

GM expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39 percent equity stake in the reorganized company, the people told the paper.

The plan is still in a state of flux but GM and the union could finalize terms as early as next week, the paper said.

GM has been in talks with the UAW on a new contract and new payment terms for the $20 billion it owes the union for retiree health care.

Reuters attempts to reach GM and UAW after normal business hours were unsuccessful.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Anshuman Daga)