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Both people who had been briefed on the talks said that all economic issues including pay, work rules, job security promises and health care contributions, are contingent on whether a VEBA is agreed to, so the negotiations have been slowed.

The UAW is seeking to trade taking on the trust for pledges from GM that it will build new vehicles in U.S. factories, the people said.

Deutsche Bank analyst Rod Lache said in a note to investors Thursday that the union has agreed to the concept of a VEBA, but so far doesn't like the company's terms.

``The UAW knows that GM cannot sign a contract that excludes a VEBA deal at this point, and that they cannot accept the consequences of an uncompetitive cost structure either,'' Lache wrote. ``Without a VEBA deal, GM has threatened to begin a much more aggressive downsizing of its U.S. manufacturing base.''

Lache wrote that GM knows it is risking a strike.

``It is our belief that the most likely outcome is that GM and the UAW will reach a compromise and pursue a VEBA solution after a few days of drama,'' he wrote.

Since the company and union are billions of dollars apart on how much GM would pay into the trust, Gettelfinger wanted to talk about other issues, one of the people said.

Now under discussion is a second offer from GM that doesn't include the trust but has larger cost cuts, including up to a $5 drop in hourly wages, increased health care contributions, fewer guarantees of new work at U.S. factories, reduced vacation time and other items