Feb. 15 (Bloomberg) -- General Motors Corp. resumed negotiations with the United Auto Workers union today and Chrysler LLC continued talks as the automakers approach a Feb. 17 deadline for tentative agreements to slash labor costs.

The union had put its focus on negotiating with Ford Motor Co., the only major U.S. automaker not relying on government aid to survive, while talks with GM and Chrysler produced few results.

“Chrysler LLC is currently meeting with the UAW,” company spokeswoman Shawn Morgan said today in an e-mailed statement. “The company is working diligently on its viability plan and will submit it by its deadline.”

GM returns to talks after they stalled on Feb. 13. The union objected to GM and Chrysler proposals to modify a retiree health- care fund that UAW lobbyist Alan Reuther said went beyond the requirements of the $17.4 billion U.S. Treasury loans. GM and UAW bargainers resumed negotiating today, a person familiar with the talks said.

The government requires signed preliminary labor agreements by Feb. 17, though it hasn’t said what the consequences would be of missing the deadline.

Ford continues talking with the union, said company spokesman Mark Truby, who declined to elaborate further.

“The UAW has a better relationship with Ford and feels that an agreement that suits both sides can be reached and can then be spread to the other automakers,” Harley Shaiken, a labor professor for the University of California at Berkeley, said last night.

Talks Off, Back On

The UAW halted serious negotiations with Detroit-based GM Feb. 13, a person familiar with the talks said. Chrysler is still talking with the union, though meetings haven’t been substantive, said a person briefed on those discussions, in part, because union President Ron Gettelfinger has stayed at the Ford talks.

Ford had said it expected to receive whatever concessions the UAW granted GM and Chrysler, and Gettelfinger said last month that Ford likely would get similar concessions.

The GM and Chrysler proposals on the Voluntary Employee Beneficiary Association “contradict the explicit terms of the Treasury loan agreements, and would severely hurt retirees,” the UAW’s Reuther said in an e-mail Feb. 13. “These proposals are a non-starter as far as the UAW is concerned.”

The terms of the Dec. 19 loan agreements from the U.S. Treasury require GM and Auburn Hills, Michigan-based Chrysler to convince the UAW to accept half of scheduled payments into a union-run retiree health-care fund next year as equity instead of cash.

The automakers are also seeking to eliminate supplemental unemployment pay and to change plant work rules to trim labor expenses.

Cash at Stake

In GM’s case, the union must sign off on a cash contribution of $10.2 billion to the VEBA instead of $20.4 billion, GM said Jan. 15. The UAW already agreed to accept reduced cash payments into the health-care fund, which was established under the 2007 contract that let automakers pay new workers half as much as traditional union employees.

GM spokesman Tony Sapienza declined to comment today on the status of the talks.

Gettelfinger said in 2007 that the union was confident the VEBA could pay the health-care benefits of retirees for the next 80 years. He has said he’s willing to make additional concessions to help the automakers avoid bankruptcy if auto executives, debt holders and others also sacrifice.

Chrysler spokeswoman Lori McTavish declined to comment yesterday on the status of the talks.

Sapienza said Feb. 13 GM is committed to meeting the Feb. 17 deadline. Chrysler said it also plans to meet the deadline.

More Savings

The automakers are also asking the union to end a 54-year- old benefit that ensures almost full pay during layoffs.

The so-called “supplemental unemployment benefit,” or “SUB” pay, gives laid-off workers most of their take-home wages. Automakers and the UAW are discussing the future of the program, said people familiar with the talks, who asked not to be named because the negotiations are private. The UAW isn’t negotiating cuts in core wages or benefits, the people said.

Lacking that cushion, older union members may retire and make way for new hires who are paid half as much, people familiar with the bargaining strategy said. Members of Congress who opposed an auto bailout criticized the benefits, and the U.S. Treasury loans require the automakers to stop all but “customary severance pay” to laid-off employees.

GM and Chrysler are offering buyouts for most of their 91,000 UAW workers.

The automakers in the past two weeks eliminated the so- called jobs bank, a 25-year-old program that paid UAW employees their full salary to report to work with no duties to perform, which was also criticized by Congressional Republicans last year.

Bondholder Negotiations

Advisers to GM’s debt holders are also in discussions to reduce $27.5 billion in unsecured debt to about $9.2 billion by swapping for equity, said two people close to the talks. GM bondholders are working to craft a debt exchange that encourages investors to participate, said a person with direct knowledge of the discussions.

If GM and Chrysler can’t persuade the UAW and bondholders to agree to new terms, the government could force the automakers to return the loans or convert them into funding for a government- backed bankruptcy.

GM Chief Executive Officer Rick Wagoner told Congress in November that Chapter 11 would lead to liquidation because shoppers won’t buy from a bankrupt automaker.

To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net.

Last Updated: February 15, 2009 21:24 EST