General Motors Corp and the United Auto Workers have agreed to general terms for a union-run fund sought by the auto maker to reduce retiree health care costs, three people with knowledge of the negotiation told Bloomberg News.

The agreement in principle allows the biggest U.S.auto maker and the union to turn to issues including wages, job security, pensions and health care for active workers, said the sources, who didn't want to be named because the negotiations are confidential.

Bargainers last week suspended talking about GM's plans to shift 50 billion U.S. dollars in retiree health care obligations off its books through the fund because they couldn't agree on how much the auto maker would contribute, the people said. The two sides returned to the issue after Detroit-based GM proposed alternatives including reduced wages and employment, the people said.

The prospect of such reductions was "exactly what the UAW needed GM to do in order to be able to sell" the health care fund to the rank and file, said Sean McAlinden, an analyst at the Center for Automotive Research in Ann Arbor, Michigan.

The medical obligations of GM, Ford Motor Co and Chrysler LLC totaled 114 billion dollars at the end of last year. The three U.S. auto makers estimate they pay 25 dollars to 30 dollars more an hour for American factory workers than Japanese auto makers Toyota Motor Corp and Honda Motor Co pay at their U.S. plants. Most of the gap is due to the costs of retiree health care, the US auto makers say.

Toyota and Honda benefit from a nationalized health plan at home and have few retirees in the United States, where they are gaining market share. Declining sales and the cost of closing plants and eliminating workers contributed to 15 billion dollars in combined losses at GM, Ford and Chrysler last year. Toyota may pass GM to become the world's biggest auto maker this year.

"We are continuing to make progress; however, we are pushing to accelerate the negotiating pace at all levels," UAW President Ron Gettelfinger and Vice President Cal Rapson said in an e-mail on Friday, posted on the Website of Local 1999 in Oklahoma City.