May 24 (Bloomberg) -- General Motors Corp. shares rose after the company began replacing union employees lost to buyouts and retirements with temporary workers and a Merrill Lynch analyst recommended the stock.

GM needs the new employees to avoid hiring at factories that are closing, and to cover shortages caused by the departures. ``GM has definitely started contacting locals to get some temporary workers,'' said Dennis Henry, 63, president of United Auto Workers Local 160 in Warren, Michigan. ``They're expecting labor shortages because of the attrition.''

Shares of GM, the world's largest automaker, rose 8.3 percent. Merrill Lynch analyst John Murphy upgraded the stock to ``buy'' because of progress on the buyouts. The shares' jump was the biggest in two weeks and made the stock this year's best performer in the 30-member Dow Jones Industrial Average.

The automaker wants as many of its 113,000 union employees to leave as possible after a $10.6 billion loss last year. Hiring temporary replacements will help GM Chief Executive Officer Rick Wagoner close nine factories and three parts depots by 2008 as he seeks to cut annual costs by $7 billion.

GM lost a bid to adjourn hearings on a request by Delphi Corp., its largest auto-parts supplier, to cancel labor contracts, a step that would allow the partsmaker to impose lower wages. U.S. Bankruptcy Judge Robert Drain ruled today after GM said a delay would provide more time to negotiate an accord.

GM shares rose $2.03 to $26.51 at 4:20 p.m. in New York Stock Exchange composite trading. They have gained 37 percent this year after declining 52 percent in 2005.

Maintaining Production

GM's agreement with workers allows it to address manpower issues as they arise, spokesman Dan Flores said. He said more than 100 workers have already left the Detroit-based company. GM may need to take other steps to reduce the workforce, Wagoner told reporters two weeks ago, without giving specifics.

Flores confirmed some temporary workers have been hired, and said he couldn't estimate how many will be needed. The temporary workers will join the union while they fill the jobs, he said.

``We have to focus on maintaining production levels during the transition,'' he said. Current workers have until June 23 to accept retirement or a buyout, some as high as $140,000.

The temporary workers will make $18 to $19 an hour, or 30 percent lower than the average UAW assembly worker's pay of about $27, and they won't receive benefits, Flores said.

Merrill Report

Merrill Lynch's Murphy wrote today he expects about 30,000 workers will take some form of GM buyout. He raised his estimate of GM's 2007 profit to $4.10 a share from $1.90, citing savings from the buyouts. He raised the shares' target price to $37.

``We felt GM was accelerating its current restructuring program,'' Murphy said today in an interview. The buyout is ``an attempt to get ahead of the curve.''

``What that also gives GM the ability to do is close plants sooner than it had previously scheduled those closures, probably about two to three years,'' he said.

Local 160's Henry said 300 of his 2,800 members have taken the buyouts and at least 700 were interested. Some people are leaving July 1, the beginning of GM's regular two-week summer shutdown, Henry said.

``We're expecting about 78 temps to come in and help out,'' said Jeff Manning, interim president of Local 31, which represents about 3,000 workers who build the Chevrolet Malibu sedan in Kansas City, Kansas. ``Some of them have started already and we'll be getting more in the next couple weeks.''

`A Necessity'

Denver Mars, vice president of Local 5960 in Lake Orion, Michigan, said about 500 of his 3,200 members have accepted incentives to leave, and GM has hired about 200 temporary workers at his factory.

``We're going to need all these workers to keep the plant going,'' Mars said. ``They're a necessity as we get into the summer.''

UAW Vice President Richard Shoemaker told union leaders earlier this month that 12,400 GM workers had accepted buyouts.

A U.S. bankruptcy judge in New York today denied GM's request to adjourn hearings as long as two months to give the automaker more time to reach a labor accord with Delphi and avoid a strike. The request was a sign that GM may be getting closer to an agreement with the partsmaker and its unions, Burnham Securities Inc. analyst David Healy said.

Negotiations Continue

Delphi, GM's former unit, opposed the adjournment. It wants the hearings to be held at the same time it seeks a negotiated settlement with GM and the unions. The United Auto Workers have said they will strike if Delphi tears up the current contract. GM lawyer Jeffrey Tanenbaum said today GM will keep up negotiations.

Delphi Chief Executive Officer Steve Miller has said he's seeking financial assistance from GM, the world's largest automaker, to get Delphi's union workers to accept pay cuts. He plans to close 21 of 29 U.S. manufacturing locations, and has threatened to reduce salaries from $27 an hour to as low as $12.50 without GM's help.

As part of GM's 1999 spinoff of Delphi, GM agreed to cover retiree and health-care costs for former GM workers if Delphi were unable to meet those obligations. GM has said a Delphi bailout would cost it $5.5 billion to $12 billion, with the outcome probably closer to the lower end of the range.

Idled Workers

Taking active workers off payrolls would let GM put idled employees back in factories that are operating. Under GM union contracts, employees get almost their full pay even where there's no work for them to do.

GM's 8.375 percent bond due in 2033 rose less than a cent on the dollar to 74 cents today, yielding 11.5 percent, according to Trace, the bond-price reporting system of the NASD. The debt traded at about 66 cents to yield 12.8 percent at year-end.

Workers with at least 30 years at GM have been offered $35,000 to retire and begin drawing a $36,000-a-year pension. Workers with at least 27 years of experience would be paid slightly less than $36,000 a year until they reached full retirement. GM workers not eligible to retire can take a buyout of as much as $140,000 and give up company health care.

Union members had 45 days after the meeting at their plant to decide if they will accept the offer, followed by a seven-day period in which they can change their mind.

GM would only be hiring the temporary workers if many long- term employees had accepted the buyout offers, and in turn, were causing a significant manpower shortage, said Harley Shaiken, a labor professor at the University of California at Berkeley.

``What we're seeing is the baby boomers accelerating their exit,'', Shaiken said, referring to Americans born between 1946 and 1964, the oldest of whom turn 60 this year. ``There will be a lot of training involved, a lot of effort in managing a transition of this size.''

To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: May 24, 2006 17:21 EDT