Following the tentative deal between auto giant General Motors and the United Auto Workers Union (See: GM, UAW settle strike with new health), the two have reached an agreement under which GM will pay $29.9 billion into an independent trust fund to cover the cost of health care for its retired workers.

The agreement represents a major breakthrough for GM, which is restructuring to cut costs in the face of growing competition from Japanese rivals like Toyota whose sales have been eroding its market share.

GM has committed to pay an initial $24.1 billion into a union managed voluntary employee benefit association (Veba) that will also start covering retiree healthcare costs from 2010.

"Health care is in a crisis in this country," Ron Gettelfinger, president, UAW said. "Our retirees will be protected under this VEBA."

According to the UAW, it has also won an agreement that new vehicles and models would be built in the US and production at 16 US plants over the next four years would continue. It said that GM had committed to a "total moratorium on outsourcing" its production facilities, which would help prevent job losses in the US.

As part of the agreement GM said it would make 3,000 temporary workers permanent.
But it also said it would be able to hire new workers for non-core manufacturing jobs for about half the hourly rate of those working on the assembly line, creating fears of a "two-tier" system.

The UAW GM national council - made up of presidents and bargaining chairs from more than 80 GM facilities across the nation - voted to unanimously recommend ratification of the 2007 tentative agreement with General Motors, after meeting on Friday 28 September for four hours to discuss the details of the proposed agreement with the automaker.

"We''re very pleased to report that it was unanimously supported and endorsed by our national council members," UAW President Ron Gettelfinger said at a news conference

Job security had been a major point of disagreement in negotiating new contracts for the 73,000 UAW members at GM whose previous contracts expired on 14 September. If this agreement is approved by GM''s rank-and-file, the contract could form the basis of UAW negotiations with the two other main US carmakers, Ford and Chrysler, due to start next week.