According to automotive industry analysts, if the ratification process of the new contract by the United Auto Workers will be successful, it will benefit General Motors with $2 billion to $3 billion per year. GM intends to use the profit to increase their production of hybrid vehicles, and for the development of new product lines, added the analysts.

Although specific details of the new contract had not been publicized, the $3 billion estimated savings is reported to come from the shift of GM's retiree health care obligations to a trust fund controlled by the UAW through a VEBA or the Voluntary Employees Beneficiary Association.

Presently, GM pays bout $3.3 billion per year for their retiree health care obligations that covers their retired hourly employees and their spouses. The new contract will remove this obligation from GM but the savings will be subjected to the other element of the deal like the provision of hiring temporary workers to be paid on regular rate.

According to Shelly Lombard, a senior high-yield analyst at the New York-based bond research firm GimmeCredit, with just the VEBA, GM will gain $3 billion per year. But this profit will still be modified depending on the jobs bank where the automaker pays laid-off workers most of their salaries.

According to an anonymous source, the new contract also includes lower labor costs for newly hired employees, as well as will offer early retirement and buyout offers that will invite high paid officials out of their posts.

With these other contract features, GM's savings will still increase. The automaker had already spent millions just for the jobs bank, Lombard added.

On the other hand, Himanshu Patel, another analyst from JP Morgan, estimated GM's savings to only $2 billion with the VEBA making up 60 to 70 percent in his note to investors.

The new deal calls for GM to pay 70 percent of its retiree health care obligations according to another anonymous source. Analysts estimates GM's obligations to $51 billion and the company will only pay the UAW $35 billlion.

"The funding is expected to come mostly from cash and in staggered payments over two years," Patel wrote.

With the negotiations, GM was seeking to cut or even eliminate the $25-per-hour labor cost discrepancy with the Japanese automakers with U.S. plants. GM did not confirmed if the gap was closed to how much and the automaker refused to release the details until the 74,000 auto workers have voted on the contract. According to Rick Wagoner, GM chairman and Chief Executive said that the new deal helped the company "close the fundamental competitive gaps that exist in our business."

One of GM's major plans is to put their Chevrolet Volt, a vehicle that generates power from electricity and fuel sources to production by 2010. GM already unveiled a prototype of the vehicle earlier this year. The automaker is already in the middle of their Buick nameplate revival with their best selling Buick Enclave crossover in line with the Acura MDX, Audi Q7, Lexus RX 350, and Volvo XC90 (with Volvo mirrors).

"Typically, you would certainly hope that the vast, vast majority of those savings drive to the bottom line, but of course if they invest more in product, that would drive stronger performance to the bottom line," said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.

Briefing of Local union presidents was held yesterday to discuss the terms of the contract and the 74,000 UAW members will vote for the contract next week. The UAW chief expects for the contract to be ratified even despite the concerns expressed by some union members.