May 29 (Bloomberg) -- General Motors Corp. U.S. employees represented by the United Auto Workers ratified an agreement that may save the automaker $1.3 billion annually and facilitate a quick exit should GM file for bankruptcy.

The accord was approved with 74 percent voting in favor, the union said today at a news conference. The deal also calls for a health-care fund for union retirees to get a 17.5 percent stake in a reorganized GM. The UAW has about 54,000 members at GM, which employed 243,000 people at the end of last year.

GM, which in 2008 ended a 77-year reign as the world’s largest automaker, will file for bankruptcy on June 1 and sell most of its assets to a new company, people familiar with its plan said yesterday. GM is surviving on $19.4 billion in U.S. government loans, after losses of almost $88 billion since 2004.

“What you don’t want to do is go into a bankruptcy without a deal in place,” Arthur Wheaton, a Cornell University labor specialist in Buffalo, New York, said before the vote results were announced. “Without ratification, they get whatever a bankruptcy judge thinks is fair. A bankruptcy judge does not want to tear up a union contract.”

UAW President Ron Gettelfinger said the GM talks were “difficult and challenging” and he called the concessions by his Detroit-based union’s members “drastic.” Cal Rapson, the UAW vice president in charge of GM bargaining, provided the estimate of cost savings to the company.

“We are satisfied we’ve done the right thing,” Gettelfinger told reporters at UAW headquarters.

‘Eliminated the Gap’

The agreement, which modifies the contract reached by the two sides in 2007, “will enable GM to be fully competitive and has eliminated the gap with our competitors,” said Diana Tremblay, the Detroit-based company’s vice president of labor relations, in a statement.

GM’s path through bankruptcy also may be smoothed by an accord with some of its biggest bondholders that would give them an equity stake in the reorganized automaker. In addition, the company’s employees represented by the Canadian Auto Workers ratified a cost-saving contract on May 25.

“People have enjoyed beating us up so much,” Gettelfinger said. “You know what, that’s off the table. Maybe they can look somewhere else now, like management.”

Health-Care Fund

Under the UAW agreement, the health-care fund also would get $6.5 billion in preferred stock in the revamped company that pays a 9 percent dividend, a $2.5 billion note to be repaid in installments until 2017 and warrants for as much as 2.5 percent of the common shares. GM would be able to pay less cash to the fund, known as a Voluntary Employee Beneficiary Association.

The retirees would give up some medical benefits, such as dental and vision programs and some coverage for medications for ulcers and erectile dysfunction, according to a UAW document.

GM agreed to new incentives to entice workers to leave the company. Those not eligible to retire would get as much as $115,000 in cash and a $25,000 voucher to buy a car, the union has said in information distributed to members.

Retirement-eligible production workers would be offered $20,000 and skilled-trades employees who qualify to retire would get $45,000. Both groups would also receive $25,000 vehicle vouchers.

Plant Investments

GM will invest in assembly and stamping sites in the U.S. for small cars, using idled plants, according to a union summary of the agreement. Those locations will be set up to build about 160,000 vehicles annually, the UAW said.

The company said today that it would retool an idled plant that has UAW workers for such production. Neither the vehicles nor the factory has been selected yet, GM said.

Four factories now scheduled to close also would be designated to resume production should U.S. auto sales, now hovering close to 27-year lows, recover more quickly than forecast, according to the information given to UAW members.

Chrysler LLC reached a similar agreement with the union before filing for Chapter 11 protection on April 30 and intends to keep the accord when it sells most of its assets to a new company led by Fiat SpA.

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

Last Updated: May 29, 2009 14:29 EDT