UAW Talks Get Push

United Auto Workers President Ron Gettelfinger has told members of his bargaining team that he is willing to agree in principle to the creation of a multibillion-dollar, union-controlled health-care trust fund to allow Detroit's auto makers to shed about $95 billion in retiree costs, people familiar with the matter said.

But a deal is far from certain. The two sides, currently in talks over a new labor contract, still must close a huge gap in the complex negotiations over how much money the auto makers would put into the fund, these people said.

The gap between funding proposed by the auto makers and the level discussed by the UAW is "still well into the several-billion-dollars range," said a person familiar with the talks. But the two have narrowed the gap over the past week.

Mr. Gettelfinger's openness to the idea could bring General Motors Corp., Ford Motor Co. and Chrysler LLC one step closer to a transformative labor deal that could lift billions in retiree health-care liabilities off their books. That could free up resources to turn around their ailing North American operations. GM is believed to owe about $51 billion in future retiree costs; Ford about $23 billion and Chrysler around $16 billion.

The idea involves a health-care trust known as a voluntary employee beneficiary association. "He is not in principle against a VEBA. It's just about getting enough money, enough funding at this point that will make him feel comfortable," said one person familiar with Mr. Gettelfinger's thinking.

Mr. Gettelfinger has in the past appeared cool to creating a deal that would put the UAW in charge of retiree health care. But he has told union negotiators in recent days that creating a VEBA "means the auto makers can't do all sorts of other stuff to us," said one UAW official involved in the talks. One UAW fear is that the auto makers would demand concessions in other areas such as wages and active-employee health care if they can't secure a deal to contain retiree medical costs.

UAW and the auto makers are meeting around the clock and exchanging offers frequently to make the deal happen, said several people familiar with the talks. The UAW and the auto makers have largely come to agreement on issues such as health-care inflation and actuarial figures about the 721,000 active workers, retirees and spouses covered by the auto makers, they said.

Detroit's auto makers are believed to be pushing to fund the VEBA at no more than 70 cents on the dollar, which would create a trust fund in excess of $60 billion, making it one of the largest investment funds in the country.

The current UAW national contract covering 180,000 employees at GM, Ford and Chrysler expires Friday at midnight, but the two sides could agree on an extension.

One obstacle, say union and management people involved in the talks, is Mr. Gettelfinger's desire to take less money up front and have the auto makers backstop the trust with an agreement to put more money in later if health-care inflation rises faster or the trust's investments don't earn as much as projected.

The auto makers are split on the idea of a backstop, people familiar with the discussions say. It was unclear which was resisting the backstop.

The auto makers are in different positions when it comes to financing a retiree health-care deal. GM has nearly four times as many retirees as active workers, while Ford is closer to 2-to-1 and Chrysler at just over 1-to-1.

Mr. Gettelfinger has had to overcome some skepticism among UAW negotiators. The union negotiated a VEBA with Caterpillar Inc. in the late 1990s that ran out of money by the end of 2005.

Officials said that the VEBA talks were overshadowing other issues such as wages, job security or pensions.

Agreeing to the VEBA could allow the UAW to secure commitments on future vehicles and advanced-powertrain products. For example, the UAW would like GM to build its electric car the Volt in the U.S., preferably at its Lordstown, Ohio, assembly plant, said people familiar with the GM talks.

Another issue is whether auto makers, once largely freed of retiree health care, will push for national health care, as the union would prefer. If some sort of national plan passes, auto makers want to know if they would get some of their money back.

Standard & Poor's analyst Robert Schulz said that a VEBA would be viewed as a positive, but he said the firm will be looking closely at "how much cash is committed and how quickly the savings accrue." He said "if it took too much cash it probably would be more of a negative than a positive. But we don't think that's likely."

Write to Jeffrey McCracken at jeff.mccracken@wsj.com²