Contract talks between General Motors Corp and the United Auto Workers union resumed on Sunday, a day before tens of thousands of GM factory workers were due to return to work at the No. 1 U.S. automaker in the absence of a new contract.

A union local representing workers at GM's Saturn plant in Spring Hill, Tennessee, said it had been informed by UAW negotiators that the union hoped to have an acceptable resolution to the talks by Sunday evening.

UAW Local 1853 said in a recorded message for workers that it had been informed by UAW Vice President Cal Rapson's office Sunday afternoon that talks are continuing and they hope to achieve an acceptable resolution for our UAW membership some time this evening.

Representatives for both sides broke off talks around 9 p.m. EDT Saturday and were back at the table around 11 a.m. EDT Sunday, two days after the expiration of the UAW's existing contract for some 73,000 GM workers.

The resumption of the closely watched talks came after a conference call between GM Chief Executive Rick Wagoner and his counterparts at Ford Motor Co. and Chrysler LLC, both of which have signed contract extensions with the UAW.

Wagoner, Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli and Chrysler President Tom Lasorda joined the conference call on Saturday, a person familiar with call told Reuters.

The outcome of the contract talks is seen as crucial to the bid by the Detroit-based automaker to recover from combined losses of $15 billion last year and sales difficulties that have driven their slice of the U.S. market below 50 percent.

GM, Ford and Chrysler are seeking sweeping concessions from the UAW to close a cost gap with Toyota Motor Corp. they say amounts to more than $30 per hour for the average worker.

The UAW agreed to extend its contract with GM on an hour-to-hour basis late Friday, just as it was due to expire.

While substantial progress has been made on some areas of the GM contract, major issues also remained unresolved as of late Sunday morning, a person close to the talks said.

GM SETS THE PATTERN

As the UAW's strike target, GM is expected to be negotiating a contract that will be used as a pattern for the union's talks with Ford and Chrysler.

The early stages of the labor talks focused on a complex plan to allow GM to cut billions of dollars in expenses for retiree health care by paying into a new UAW-aligned trust fund, according to people close to the talks.

The weekend of continued negotiations between GM and the UAW was taken as a sign by analysts and many UAW workers that the two sides were nearing a deal after eight weeks of bargaining that would avoid a strike.

Some union locals, who had readied workers to walk picket lines on Friday night, opened up their meeting halls on Sunday after closing them Saturday.

More than 70 union-represented GM facilities were set to shift back into operation on Monday.

Despite the signs of progress, the talks have taken some unexpected turns since last week.

After hitting an apparent snag in talks, the UAW singled out GM as its strike target, a term it had avoided in more collegial negotiations in 2003.

Rival automakers Ford Motor Co. and privately held Chrysler LLC quickly signed contract extensions with the UAW, clearing the way for their factories to keep operating.

The last major UAW strike against GM was in 1998, when a walkout shut down almost all of the automaker's assembly plants, causing sales to plummet. GM never recovered its pre-strike U.S. market share of 31 percent and has lost about 7 percentage points since.

Wall Street analysts have been optimistic GM would clinch a deal to slash health-care costs totaling $4.8 billion in 2006.

Ford and Chrysler LLC have also been in talks with the UAW to establish such a trust, sources have said.

GM's unfunded liability for such costs has been estimated at more than $50 billion.

GM and UAW have been sparred over how fully GM should be required to fund a special trust -- known as a voluntary employee beneficiary association, or VEBA -- in exchange for clearing that overhang from its balance sheet.

(Additional reporting by Kevin Krolicki and Poornima Gupta)

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