DETROIT (Reuters)—General Motors Co., facing a pension plan funding shortfall that may rival its market value by year-end, has won an agreement from the United Auto Workers to consider ways to reduce the risk of its underfunded plan, a letter between the automaker and the union shows.

The letter, which is part of a proposed four-year labor contract with GM workers, does not detail specific steps GM and the UAW might take to address the pension problem.

But it suggests both sides would consider a plan allowing union-represented retirees to voluntarily take lump-sum cash payments in exchange for giving up their pension claims.

GM exited bankruptcy in 2009 as part of a sweeping restructuring that slashed debt and now boasts total liquidity of almost $40 billion. But addressing the automaker's pension shortfall would take aim at a major concern for GM investors.

"The parties agreed that the national parties may mutually agree during the term of this agreement to amend the plan to add retirement options for some or all existing retirees," GM Vp of Labor Relations Cathy Clegg wrote to Joe Ashton, the UAW official in charge of GM negotiations.

Those options would "benefit existing retirees by providing an additional voluntary option," according to the letter.

UAW officials did not immediately comment, but union dissidents said it could force further concessions on retirees, who will not vote on the tentative contract.

The possibility flagged by the letter could lead to an agreement on retiree benefits that may not be detailed to the nearly 113,000 active union workers who vote to ratify labor contracts at GM, Ford Motor Co. and Chrysler Group L.L.C., said Gary Walkowicz, a union official who works at a Ford plant in Dearborn, Mich., but is opposed to the GM deal.

GM declined to comment on the letter, which is part of the contract UAW local bargaining units are expected to ratify this week. The letter was revealed in an addendum to the contract released by union dissidents on a website.

Globally, GM's pension obligations in its plans topped $128 billion at the end of 2010. The plans are underfunded by more than $22 billion, according to the automaker's annual securities filing with U.S. regulators.

Some analysts said the underfunding could swell to more than $30 billion by the end of 2011 because of the recent drop in interest rates. This would put the shortfall on par with GM's market capitalization of less than $33 billion.

"GM's financial structure is considerably weaker than what its balance sheet appears, and its pension liabilities are the reason," Kenneth Hackel, president of CT Capital L.L.C., said.

In the U.S. alone, GM's pension obligations topped $100 billion at the end of last year. By the end of June, the U.S. plan was underfunded by $10.8 billion, excluding some $2 billion in stock GM put in plan in January.

"The presumption then is there would be some kind of voluntary buyouts," said Gregg Shotwell, a retired GM and Delphi Corp. worker and union dissident.

"My question to the UAW is your duty isn't to enhance the equity and liquidity of General Motors," he said. "It's to protect the retirees in this case."

GM provides pensions, or fixed payments, to 515,900 GM retirees and their surviving spouses. More than two-thirds of the liability represents claims of blue-collar workers.

At an investor conference earlier this month, GM Vice Chairman Steve Girsky said the automaker would like to take the pension risk "off the table" for investors. He pointed out that GM does not have to "put a penny" into the plan until 2015.

GM's pension risk has hurt its ability to achieve an investment grade rating and weighed on its stock, GM's Ms. Clegg said in the letter.

Mr. Hackel projects that GM's underfunded pension liability globally will swell to $36 billion by the end of the year when factoring in the lower interest rates and the weak stock market.

"To take it completely off the table, you'd have to convert everybody to a 401(k) plan," said Peter Bible, a former GM chief accounting officer. He said such a deal would parallel the 2007 agreement with the union that relieved GM of its retiree health care obligations for UAW-represented retirees and dependents.

"That's black and white, and between there is somewhere where it will land," Mr. Bible, now a partner-in-charge at accounting firm EisnerAmper L.L.P., added. "The idea is to limit the employer's exposure to the markets."