May 21 (Bloomberg) -- The United Auto Workers said it reached a tentative agreement with General Motors Corp. and the U.S. Treasury to modify the carmaker’s 2007 labor contract and a health-care trust for union retirees.

The UAW said it is withholding details until it schedules and conducts explanatory and ratification meetings for members, which are being scheduled. Local leaders will learn details on May 26, people familiar with the plan said. GM faces a probable bankruptcy filing by June 1, the government’s deadline for the company to restructure outside of court.

The accord follows suggestions by both sides two days ago that they may not reach a settlement until shortly before the GM bankruptcy deadline. The automaker is still trying to complete a debt-cutting agreement that bondholders have rejected so far.

“Today’s announcement is a positive development in GM’s effort to restructure and become a strong, viable company going forward,” an administration official said today.

GM said in a May 19 filing that it didn’t expect to reach an agreement on the UAW contract prior to May 26 when an exchange offer expires for bondholders to swap $27 billion in debt for 10 percent equity in a restructured automaker.

UAW President Ron Gettelfinger said that same day in Washington that the union and GM have a “long way to go” to reach an agreement that local labor leaders could ratify. The union was resisting GM’s plan to close 16 U.S. manufacturing locations and increase imports from markets such as China.

Buyouts Expected

Chief Executive Officer Fritz Henderson said last week that he was willing to cut imports that were set to rise 12-fold in return for union help making the models profitable to build in the automaker’s home market.

Roger Kerson, a UAW spokesman, didn’t immediately respond to phone calls seeking comment. A GM spokeswoman, Sherrie Childers Arb, had no immediate comment.

GM rose 22 cents, or 15 percent, to $1.67 at 3:02 p.m. in New York Stock Exchange composite trading. GM has proposed current shareholders will retain a 1 percent stake in a reorganized company.

GM, surviving on $15.4 billion in U.S. loans, had proposed that the union let it meet a $20 billion cash obligation to the union-retiree health fund, known as a voluntary employee beneficiary association, with $10 billion in cash paid over time and equity equal to 39 percent of a restructured GM.

No More Viagra

UAW members who attended meetings in Cleveland earlier this month said the deal is expected to include an hourly buyout and retirement-incentive program to help GM trim its U.S. hourly employment to 40,000 in 2010 from about 61,000 last year. About 7,000 workers left this year under an earlier offer.

GM, the largest U.S. automaker, has about 522,000 union retirees. Only current workers vote on contracts. GM had said a Feb. 17 agreement with the union on concessions other than the health-care agreement would save at least $1.1 billion.

Union retirees will have to give up coverage of dentist visits and some prescription drugs such as Pfizer Inc.’s Viagra, people familiar with the talks had said.

Those changes would match reductions that start as soon as July 1 for Chrysler LLC retirees, said the people, who asked not to be identified because the details aren’t public. Cuts in unemployment benefits and work-rule changes at GM also would mimic the Chrysler concessions, the people said.

To contact the reporter on this story: Katie Merx in Southfield, Michigan at kmerx@bloomberg.net

Last Updated: May 21, 2009 15:18 EDT