March 8 (Bloomberg) -- The Canadian Auto Workers union said it reached a tentative agreement with General Motors Corp. to freeze wages and pensions until 2012 and force workers and retirees to pay a monthly health-care fee in an effort to reduce the automaker’s costs.

“We are optimistic the CAW did what was necessary to protect the interests of our members, our communities and ensure that we maintain our Canadian advantage for future investments,” CAW President Ken Lewenza said today at a press conference in Toronto. “It’s painful.”

General Motors, surviving on $13.4 billion in U.S. aid, was working with the union on ways to find savings by month’s end as governments in the U.S. and Canada study plans for further assistance. Canada, which has about 20 percent of North American production, is seeking to maintain its market share.

“The agreement marks a positive further step in GM Canada’s restructuring plan,” the company said in an e-mailed statement today. “We compliment the CAW for their leadership to share sacrifices in these extremely challenging economic times.”

No Bonus

Industry Minister Tony Clement made concessions by the union a condition for government help, which may total as much as C$7 billion ($5.4 billion) for GM alone. The union in turn made the agreement contingent on government aid, Lewenza said.

“These negotiations show that stakeholders realize how serious the auto industry situation is and how important it is for everyone to come to the table,” Clement said in an e-mailed statement today.

Workers also will forgo 40 hours a year in paid time off and an annual C$1,700 bonus will be used instead to offset the cost of health-care benefits, according to a statement from the union.

The union also agreed to suspend cost-of-living adjustments for wages and pensions and lower expenses on programs such as childcare facilities and training by a third, the union said. Workers and pensioners under 65 will pay a C$30 monthly co-pay premium for health and non-wage benefits, and those over 65 will incur C$15 a month.

Vote This Week

The CAW said its agreement is subject to ratification by about 10,000 General Motors employees represented by the union. The vote will take place March 10-11.

Lewenza said the agreement with GM sets out the “pattern” for negotiations with Chrysler LLC and Ford Motor Co.

The union represents 27,800 workers of U.S. carmakers in Canada and said it will start negotiating with the “next auto company” later this week.

Separately, Republican lawmakers in the U.S. said Congress should stop providing GM with federal aid.

“The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain said on the “Fox News Sunday” program today.

Senator Richard Shelby, the top ranking Republican on the Banking Committee, said on ABC’s “This Week” program that “subsidization of anything for very long never works.”

“The automobile business -- those companies, Chrysler, Ford and General Motors -- they’re in deep trouble,” Shelby, of Alabama, said. “I’ve suggested they go into Chapter 11. That’s where they belong. And they could reorganize.”

To contact the reporters on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

Last Updated: March 8, 2009 17:10 EDT