Negotiators for the United Auto Workers union and General Motors Corp were back at the bargaining table on Monday after breaking in the early hours of the day, as thousands of GM factory employees went to work without a new contract.

Talks resumed at 11 a.m. EDT.

The UAW agreed to extend its contract with GM on an hour-to-hour basis late Friday, just as it was due to expire.

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

Analysts have seen a strike as a remote risk for GM, with several saying the weekend of nearly nonstop negotiations was a sign the two sides were making progress.

Both parties agreed to a break in talks on Monday at 3 a.m. EDT after a marathon 16-hour bargaining session that raised expectations that the union and the largest U.S. automaker were nearing an agreement.

The sudden adjournment came just hours after several UAW local officials were told that the union's negotiating team intended to remain in talks until it reached a resolution.

Any tentative pact between GM and the UAW would have to be ratified by a majority of GM's 73,000 hourly workers.

A GM spokesperson said all auto plants opened as scheduled on Monday, but declined to comment on the progress of the talks.

GM, Ford and Chrysler are seeking sweeping concessions from the UAW to close a cost gap with Toyota Motor Corp they say amounts to more than $30 per hour for the average factory worker.


As the UAW's strike target, GM was expected to be negotiating a contract that would be used as a pattern for the union's talks with Ford and Chrysler.

But the talks, which were under way at a GM building just blocks from its Detroit headquarters, have taken some unexpected turns since last week.

After hitting an apparent snag, the UAW singled out GM as its strike target on Thursday -- a term it had avoided in more collegial negotiations in 2003.

Rival automakers Ford and privately held Chrysler quickly signed contract extensions with the UAW, clearing the way for their factories to keep operating.

The chief executives of the three U.S. automakers, including GM CEO Rick Wagoner, spoke on a conference call on Saturday, a person familiar with the matter said.

The early stages of the labor talks had focused on a complex plan to allow GM to cut billions of dollars in expenses for retiree health care by paying into a new UAW-aligned trust fund, according to people close to the talks.

Wall Street analysts have been optimistic GM would clinch a deal to slash health-care costs totaling $4.8 billion in 2006. GM's unfunded liability for such costs has been estimated at more than $50 billion.

GM and UAW had discussed how fully GM should be required to fund a special trust -- known as a voluntary employee beneficiary association, or VEBA -- in exchange for clearing that overhang from its balance sheet.

JP Morgan analyst Himanshu Patel said the financial structure of the health-care trust could be very complex.

While we suspect the UAW itself will resist taking more than a token amount of equity contribution into the VEBA, we would not be surprised if the UAW is asking GM to issue new equity to the public as a way to raise cash to fund the VEBA, Patel said in a note on Monday.

Bear Stearns analyst Peter Nesvold also said it was unclear if GM has enough liquidity to fund a VEBA without a meaningful capital raise.

UAW President Ron Gettelfinger has also sought job security guarantees from GM in exchange for accepting a VEBA, two people familiar with the union's stance in negotiations said.

But union dissidents have vowed to fight ratification of such a deal if presented to rank and file.

Three former UAW regional officials sent an open letter to Gettelfinger on Sunday night urging him to reject a VEBA, saying such an agreement would undo decades of hard-won health care benefit protections.