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The Canadian Auto Workers Union announced on Monday that it has reached a deal with GM to settle a dispute at the company's truck plant in Oshawa, Ont.

The carmaker had said in June it would close the Oshawa pickup truck plant and cut about 2,600 jobs next year. On Monday, the union said it has reached a deal that will allow two more vehicles to be built at a new car-assembly line in Oshawa.

"Included in the settlement are new product commitments for (the plant), which will be partially offset the job loss from the truck plant closure," the CAW said in a press release.

The CAW said GM has agreed not to demolish the truck plant for the duration of the new contract. GM also made promised to maintain a third shift on its Impala production next and allocating a new front-wheel drive vehicle to start production in 2013.

GM's David Patterson confirmed to CTV Toronto that two new car products would be coming to Oshawa.

CAW president Buzz Hargrove said the agreement will mean a lot of people will "breathe a sigh of relief."

CAW Local 222 spokesperson Chris Buckley told workers at a televised meeting this morning, "I am sure we made the very best of a very terrible situation."

The deal, which will expire in 2011, will also help senior employees qualify for a retirement incentive package available to workers with 30 years of service.

"If you're four years from retirement, they'll give you up to 65 per cent of your wages plus a $35,000 car voucher," said CTV Toronto's Austin Delaney.

Delaney told Â鶹ӰÊÓnet that employees who have worked at least eight years at the plant will be offered $100,000, as well as a $35,000 car voucher. Those with at least three years will be offered the vehicle voucher and about $37,000.

Delaney said workers he met at the truck plant spoke favourably about the deal. More than 3,000 workers are eligible for the retirement deal.

Workers were outraged earlier this summer when GM announced it would close the truck plant next year. They temporarily blockaded GM's Canadian headquarters and the CAW filed a grievance against the carmaker.

"This action and your solidarity brought GM back to the table," Buckley told workers.

But he also noted "we can't force GM to make vehicle they can't sell."

Later in the day, Buckley told Â鶹ӰÊÓnet, the deal will help younger workers in Oshawa because it gives incentives for older employees to take the buyouts.

However, he added, "at the end of the day, our membership is going to slip in Oshawa. We've lost our truck plant."

Buckley said he wants Ottawa to do more to address issues such as soaring gas prices and unfair trade.

GM makes production cuts in the U.S.

Weakening consumer demand for pick up trucks and SUVs are forcing GM to cut production by another 117,000 vehicles, the automaker said Monday.

One shift will be eliminated at plants in Ohio, and Louisiana, according to GM. The cuts will bring the company to just below the 300,000 vehicle production cuts it plans for this year. GM sales in the U.S. have been down about 16 per cent for the first half of 2008.

The automaker has been struggling recently as increasing gas prices and a slumping U.S. economy have slowed the sales of pickup trucks and SUVs.

GM announced in mid-July that it planned to lay off salaried workers at its North American facilities. It also said at the time it would cut truck production, suspend its dividend and borrow between $2 billion and $3 billion in response to the slumping American market.

With files from The Canadian Press