Updated from 1:51 a.m. EDT

General Motors

(GM) - Get Report

, under the direction of the U.S. Treasury, is near a deal that would slash its hourly labor costs by more than $1 billion a year and reduce its $20 billion pledge to the United Auto Workers to cover health care obligations, the

Wall Street Journal

reports.

GM and the union could finalize terms as early as next week. But the plan is still in flux, the

Journal

reports, citing people familiar with the matter.

GM expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39% equity stake in the reorganized automaker, the newspaper reports.

GM declined to comment for the

Journal

, while a UAW spokesman couldn't be reached.

The proposed deal, which the

Journal

notes could still fall apart, would have to be approved by the UAW's 60,000 members at GM, who are expected to face steep cuts in pay and benefits, as well as 20,000 additional layoffs.

With the UAW backing, the

Journal

notes, people inside the Treasury are increasingly confident they can push through a massive reorganization of GM, overriding protests from its bondholders and dealers.

GM, which has received $15.4 billion in bailout funds from the U.S. government to date, faces a June 1 deadline to restructure its debt or face bankruptcy.

GM CEO Fritz Henderson said earlier this week that a bankruptcy filing by the automaker was "probable."

Meanwhile, reports say General Motors is expected to announce Friday that it will begin eliminating at least 1,100 dealers, a day after

Chrysler

said it would close 789 dealerships.