General Motors Co and the United Auto Workers union were nearing a new contract for 49,000 production workers in talks in Detroit on Friday, people with direct knowledge of the negotiations said.

I am very optimistic that the negotiations process is entering its final stage, UAW Vice President Joe Ashton said in an update for the union's GM workers posted online.

I am happy to inform our membership that we are getting very close to a framework for an agreement that will bring our negotiations to a successful conclusion.

The UAW chose to try for an agreement with No. 1 U.S. automaker GM first, before reaching a deal with Chrysler and finally with Ford Motor Co , those close to the talks have said.

The talks have played out at a time of increasing uncertainty about the strength of U.S. auto sales for the remainder of this year and in 2012, as well as concern about the risk of another recession.

GM and the other two Detroit automakers have offered one-time contract-signing bonuses and profit-sharing rather than traditional wage increases, while the union has sought higher wages for entry level workers and cost-of-living increases.

At stake are wages and benefits for about 113,000 unionized U.S. auto workers who have gone without a base pay increase since 2003.

One of the priorities for the union has been to secure commitments by the automakers to bring more vehicle production to the United States. Heading into the contract talks, Ashton had said the union's priority would be jobs, jobs, jobs.

In a sign there could be some consideration of reviving GM's former Saturn plant in Spring Hill, Tennessee, a delegation of local officials, including the mayor of Spring Hill, met on Thursday with GM in Detroit.

The Saturn plant had been the site of GM's experiment with a new model of production and a more collaborative relationship with workers based in part on the model of Japanese automakers led by Toyota Motor Corp <7203.T>.

GM scrapped the Saturn as part of its 2009 bankruptcy and the assembly portion of the plant has been shut. An engine plant at the site remains open.

Spring Hill Mayor Michael Dinwiddie said GM officials had given him no indication of whether the Spring Hill assembly plant would reopen.

We gave them a business update, and the plant status is unchanged, GM spokesman Greg Martin said of the meeting.

A key sticking point at GM, according to people familiar with the talks, had been the amount of signing bonuses offered to workers. Any settlement must be ratified by the union's membership.

GM had proposed a signing bonus of close to $3,500 per worker based on recent manufacturing contracts negotiated by the union, but the UAW pressed for a higher figure. Most analysts expect an agreement of $5,000 to $7,000.

That would cost GM between $245 million and $343 million.

GM stock has dropped 43 percent to $22.53 since its early 2011 high and is down 32 percent since its staring IPO value of $33 last November.

One of the issues tackled by negotiators in the last few days was healthcare costs, a person briefed on the talks said. GM workers now pay an estimated 7 percent of their healthcare costs compared with 33 percent on average in other industries.

As part of a bid to offset the cost of bonuses, GM had proposed shifting a bigger burden of those costs to UAW workers, the person said.

The UAW gave up the right to strike at GM and Chrysler through 2015 as part of the federally funded bailouts of the automakers.

Four-year contracts at all three automakers were extended beyond their Wednesday night expirations.

That follows the pattern of earlier talks, although UAW President Bob King and the automakers had held out hope for a speedier resolution this time.

Chrysler is managed and majority-owned by Italy's Fiat SpA .

(Editing by Lisa Von Ahn, Andre Grenon and Steve Orlofsky)

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