In a hugely positive step for General Motors, the carmaker, together with the U.S. Treasury and United Auto Workers (UAW), reached a tentative bargain on how they'll deal with changes to the current agreement in the face of the industry's problems and GM's increasingly probably bankruptcy. The details of the deal are being kept quiet until local unions ratify it later this week but a new report claims the outcome will see GM swap some equity with the UAW for its debts.

The Wall Street Journal reported today that the UAW's trust fund for retiree health care would get a 17.5% stake in a restructured GM under the deal. The agreement also calls for GM to place $10 billion in assets into the UAW's Voluntary Employee Beneficiary Association (VEBA), which is currently owed about $20 billion by the carmaker.

The UAW had originally hoped for a 39% stake in GM but the majority of shares will likely go to the U.S. Treasury, which has already leant GM $19.4 billion in loans so far. The outcome will likely resemble the deal recently made with Chrysler. That deal saw the UAW gain a 55% stake in the carmaker even though Chrysler still owes the UAW about $4.6 billion for its retiree health care fund.

Without the UAW deal, GM would be hamstrung in any attempts to stay out of a government-managed bankruptcy. GM may still be unable to avoid it, but with the new UAW deal meeting U.S. Treasury approval, there at least remains a chance. The carmaker has until June 1 to finalize all agreements with unions and bondholders, or file for Chapter 11 bankruptcy protection, but it’s this latter group that is proving troublesome, although they are the ones with the most to lose.

GM had attempted to persuade enough bondholders to accept a debt-for-equity swap but has reportedly failed to attain the 90% support it needs to stave off bankruptcy. The deal proposed by GM was to offer a 10% stake in the restructured company.