The newly ratified labor agreement between General Motors and the United Auto Workers, hailed as a landmark achievement that shifts $46.7 billion in retiree health-care costs to the union, will usher in an era of more competitive, daring designs for American cars and trucks -- which could mean more jobs for Americans in the long run, independent analysts say.

"This is absolutely a game-changing agreement," said Dave Cole, head of the Center for Automotive Research in Ann Arbor, Mich. "In one fell swoop, the domestic auto industry is now competitive. It can now build a car or truck as competitive with anyone else in the world."

GM spokesman Dan Flores agreed that the contract had big implications for his company. "Fundamental to success in our industry is designing and building great cars and trucks. By reducing our costs base -- that is, our structural costs -- we will now be able to free up money that we can reinvest back in the business and strengthen product even more," Mr. Flores said.

GM officials discussed the contract yesterday in a conference call with financial analysts and reporters.

A major reason domestic car companies have struggled is that Japanese, European and Korean automakers have not had to worry about retiree health-care costs, pensions and other expenses that are part of the "legacy costs" that domestic carmakers grappled with for decades.

Now UAW employees have approved a contract that will result in the formation of a fund managed by the UAW that will take over those future retiree health-care costs from GM. Chrysler's UAW employees recently approved a similar measure, and Ford's workers are expected to follow suit.

A look at what each company now pays for future retirees' health benefits -- about $25 billion per year for Ford and about $18 billion to $19 billion for Chrysler -- shows the enormity of the expenses these companies have borne for years.

The fact that they will no longer face those costs in future years -- January 2010 in GM's case after all the possible court clearances and appeals have been completed -- means that the agreement has "really leveled the playing field in a pretty dramatic way," Mr. Cole said.

That money will now be freed up to pay for new car and truck designs, many of which would never have been produced if those legacy costs were in place.

Money also will be spent on important new technology for the domestic auto industry, as well as for improving quality control and plant efficiency.

The new deals also mean that life suddenly will be more difficult for Toyota, Honda, Nissan and other companies that have enjoyed life in the auto industry without legacy costs, analysts said.

Those automakers will face a strengthened domestic auto industry that should compete on equal footing, shattering the decades-old notion that foreign companies have a lock on creative talent, engineering and quality because they've had far more money to work with.

Improved domestic products also could put a crimp in China's plans to bring imports here. China will find it more difficult to gain a cost advantage to make their cars more attractive to American consumers, Mr. Cole said.

"Even if the Chinese came here now with zero labor costs, just the cost of transportation, inventory and other expenses will amount to much more than what costs will be in the domestic automotive industry now. It allows a much more competitive position for us -- one we have not seen here in a very long, time," Mr. Cole added.

"For instance, Toyota did several minivans for the U.S. that just didn't work. But they kept doing it because their costs were so low. They could take the risk. But for domestic companies, they had to be able to bet the company on a product and take the lowest common denominator approach. It was often a low-risk product that would be developed that was probably not very exciting," Mr. Cole said.

It's important to note that for GM, it wasn't simply the approval of the labor contract that substantially closed the labor-cost gap per vehicle between GM and Toyota and Honda. That gap, which once amounted to almost $4,000 two years ago, now is about $800 per vehicle, according to Mr. Cole's estimates.

That's because GM, like the other domestics, already had taken other cost-cutting measures, and it's all beginning to add up now.

Two-tier wages, work rule changes, and more flexible production schedules to adjust to market demands, all part of GM's new contract, could save about $400 per vehicle. The future retiree health-care cost shift to the UAW could save about $800 a vehicle, and GM's cost-cutting program announced two years ago, which included early retirements, plant shutdowns and buyouts of about 34,000 workers, saved about $2,000 per vehicle, Mr. Cole said.

Add those together and that's $3,200 per vehicle for GM alone -- leaving only a roughly $800 labor-cost gap with Toyota, Mr. Cole added.

Under the new contract, in return for paying about $32 billion into the fund, GM will wipe out $46.7 billion in liability from its books. The difference amounts to a discount that will be recovered as the money GM pays into the fund is invested and generates returns, analysts said.

For rank-and-file union members, the new contract means that they no longer have to worry that the closing of one or more of the Big Three will mean the end of health-care benefits. Workers also will have greater job security with GM's pledge to produce many future vehicles at its 16 U.S. plants. GM also is bringing in-house about 3,000 jobs now outsourced to contractors and hiring 3,000 temporary workers as full-time hourly employees.

Under the new two-tier pay system, noncore, nonassembly workers will get paid less, and new hires will be paid about $14 an hour, compared with an estimated $28 per hour for current employees.

There also are changes to the so-called Jobs Bank, which pays employees even if they are not working. Under the new contact, a laid-off employee who is offered a job within 50 miles of his or her old plant must take that job or be placed on leave without pay and benefits.

Employees can refuse up to four job offers at a plant further than 50 miles away before being placed on leave.