The breakdown comes at a critical time as GM races against a Tuesday deadline to submit a plan to the government showing how it can become viable.
The Detroit-based auto giant is living on $9.4 billion in government loans, and the Treasury Department must approve its viability plan for GM to get $4 billion more. Chrysler LLC, which has received $4 billion in government loans and wants an additional $3 billion, faces the same deadline.
At GM, UAW negotiators walked away because the company made demands that were "detrimental to retirees and the ability to provide health care," according to the person, who asked not to be identified because the talks are private.
Under terms of the loans to GM and Chrysler laid down by the Bush Administration, both companies must gain concessions from unions and debtholders. Among targets for concessions is GM's cash contribution to a trust fund that will take over the obligation for retiree health care starting next year.
GM says it owes $20.4 billion to the fund, and the loan terms set a target of giving the union half of the value in cash and half in GM stock. The trust fund would take over health care payments for GM's roughly 500,000 blue-collar retirees and spouses starting Jan. 1, 2010.
The trust, called a voluntary employees beneficiary association, would let GM move about $46.7 billion in retiree health care costs off its books, making it more cost-competitive with Asian automakers. It is the key feature of a new four-year contract signed in 2007 with the UAW.
The union has said that if fully funded, the trust would provide health care to retirees for 80 years.
GM also must reduce its public unsecured debt by two-thirds and has been negotiating with bondholders to swap the debt for equity. The company said in a Jan. 15 presentation to analysts that it has $41.6 billion in debt.
GM, Chrysler and their unions must also agree to reduce the companies' labor costs so they are competitive with Japanese automakers that have plants in the U.S.
GM has said its total per-employee labor costs, including wages, pensions, benefits and retiree costs, are now $69 per hour. Toyota Motor Corp., GM's biggest competitor, says its hourly costs are $53. GM's costs will drop to $62 once the retiree health care trust takes effect, the company has said.
By AP Auto Writer Tom Krisher