A tentative contract agreement could be reached by this weekend, a source familiar with the discussions told Automotive News on Wednesday, April 16.

“They are very close,” the source said. “They could reach an agreement by this weekend. Both sides have finally come to their senses.”

As with any protracted labor negotiation, there is no guarantee a deal can be reached, but this is the first sign of real progress in the dispute that has all but halted General Motors Corp.’s SUV production in the United States.

“Negotiations are continuing, progressing,” said Renee Rogers, an American Axle spokeswoman. “The process is moving along.”

Because of the progress, the UAW called off a large protest rally scheduled for downtown Detroit, said Wendy Thompson, the retired former president of UAW Local 235 in Detroit.

UAW spokesman Roger Kerson could not be reached for comment.

Last week, UAW president Ron Gettelfinger and American Axle CEO Richard E. Dauch met. Following that, top representatives from both sides began meeting on a regular basis.

According to the source, the two sides are making progress on three fronts: wages, health care legacy costs and job classifications. Dauch has been seeking fewer classifications to win more flexibility for his U.S. plants. He has also been pushing for lower wage rates, which the UAW has resisted.

To make wage cuts palatable to employees, the two sides have been discussing a round of buyouts and buydowns for existing UAW workers.

The strike by 3,650 UAW members began at five American Axle plants on February 26 and has since idled or slowed as many as 30 GM domestic operations. By Saturday, GM will have lost 142,782 production units since the strike began, according to the Automotive News data center. Most of the lost production has been SUVs and pickups—and GM has months of inventory to sell in those vehicle lines.

The strike also has begun to stall GM’s production of sedans, including the Cadillac DTS and Buick Lucerne at the Detroit-Hamtramck car assembly plant. Other GM car production is now threatened.

Despite those threats, GM has not intervened in the American Axle negotiations.

GM, meanwhile, is slowing production of the HHR crossover at its assembly plant in Ramos Arizpe, Mexico, because of a shortage of parts made by American Axle.

Similar action affecting the plant’s Saturn Vue line could be taken soon afterward, a GM source in Mexico said.

The HHR and Saturn Vue, sold as the Chevrolet Captiva in Mexico, are both exported to the United States.

“This [American Axle] strike has affected us,” the source said. He said that if the dispute at American Axle continued, GM’s production of Kodiak trucks in Silao, Mexico, might also be hit soon.

“The idea is to continue working with our current inventory [of parts and components] but at a slower pace,” he said.

Filed by Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.