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MarketScreener Homepage  >  Equities  >  Nyse  >  General Motors Company    GM

GENERAL MOTORS COMPANY

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UAW Reaches Tentative Labor Deal With GM -- 5th Update

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10/16/2019 | 03:05pm EST

By Nora Naughton and Mike Colias

The United Auto Workers struck a tentative labor deal with General Motors Co. on Wednesday, a critical step in ending a monthlong strike that has brought more than 30 GM factories in the U.S. to a standstill.

The UAW said the agreement, covering more than 46,000 union-represented workers at GM, achieves major gains for members but declined to provide specifics.

The strike will continue for now. The decision to end it will rest with a council of union-hall leaders from GM plants across the country. Those UAW officials are set to meet in Detroit on Thursday and will vote on both ending the work stoppage and whether to send the tentative agreement to rank-and-file members for a ratification vote.

GM's union-represented workers must approve any labor deal by a simple majority.

If workers ratify the UAW's tentative deal, union negotiators will then turn full attention to talks at Ford Motor Co. and Fiat Chrysler Automobiles NV, using the GM contract as a template.

The two sides earlier had agreed to pay increases during the contract's four years, a path to full-time employment for temporary workers and no changes in the amount workers contribute toward their health-care benefits, according to people close to the talks -- all major wins for the union.

In late-stage talks this week, negotiators were also hashing out a structure to accelerate the wage scale for new hires to reach the top pay rate, the people said.

The pay disparity between veteran workers and those with less seniority has long been a sore point for UAW members, who say it is unfair to pay different wages for the same factory job.

Any deal to move newer workers up in pay faster would be a gain for the UAW but could increase the company's labor costs without other offsets.

GM negotiators, in a proposal last week, had additionally offered to invest $9 billion in the company's U.S. factories to secure new work and jobs for UAW members.

The Detroit auto maker, in return, was pressing for new contract terms that would allow it to close several now-idled U.S. factories, including a large assembly plant in Lordstown, Ohio. The closures would help GM's bottom line by boosting its manufacturing efficiency in the U.S., which has lagged behind competitors for years.

GM confirmed the tentative agreement in a statement, but didn't provide details.

Shares of GM rose 1.5% in afternoon trading. The stock price has dropped about 4% since the strike began.

Celso Duque, an assembler at GM's car factory in Detroit, said he is relieved bargainers reached an agreement and is eager to get back to work. His biggest hope for the new contract is younger workers will get more money and a secure future.

"Let's face it, the auto industry is changing," Mr. Duque said. "So I want some job security for them."

This round of talks was far more contentious than in years past, with union leaders lashing out against GM and company bargainers for making details of its contract offers public during negotiations, an unprecedented move intended to appeal directly to workers. At times, the two sides pointed fingers, blaming each other for stalling progress as talks dragged over multiple weeks.

The strike at GM is the culmination of a continuing clash between two institutions vying for a place in a fast-changing industry.

The nationwide walkout -- the company's longest since 1970 -- has caused a shortage of parts at dealer repair shops, reduced business for auto-parts suppliers and led to temporary layoffs for roughly 10,000 non-UAW factory workers at GM in the U.S., Canada and Mexico.

Analysts estimate the strike has eroded GM's bottom line by roughly $1.5 billion and is likely to put a major dent in the company's second-half results. GM is scheduled to report its third-quarter results Oct. 29.

GM, which last year initiated a major restructuring, headed into contract talks this summer with plans to close several underused U.S. factories, the company's latest effort to prove to Wall Street it is a different Detroit auto maker than the one that collapsed into bankruptcy a decade ago.

The UAW, meanwhile, is losing membership and is under pressure to show strength as a multiyear federal corruption investigation has continued to ensnare top-ranking union leaders, eroding the trust of many rank-and-file workers.

The resulting agreement could be pivotal for the two sides and will determine whether all three companies will be successful in keeping their rising labor costs in check as the U.S. car market is expected to weaken in the coming years.

Typically after a tentative agreement is reached, UAW leaders move to end the strike. But they also have the option to extend it until the labor pact is ratified, a process that can last more than a week.

Several workers said Wednesday they would support a decision to continue the strike until the tentative pact is ratified by the broader GM membership.

"I would be concerned about going back in and working without a contract, " said Josh Ingram, 32 years old, a health and safety trainer at GM's factory in Bedford, Ind.

There is no guarantee workers will approve the tentative agreement. If they vote the first proposal down -- as did Fiat Chrysler workers in 2015 -- company and union negotiators will have to return to the bargaining table to hash out a deal they believe the members will support.

A potential wild card for union leaders is that roughly 42% of GM's factory workers have never seen an industry downturn and might be a harder sell on any deal that doesn't fully meet all their demands, according to people close to the negotiations.

"Things are different now," Arthur Schwartz, a consultant and former GM labor-relations executive said. "You've got brand-new leadership, a Justice Department investigation and this is already the longest strike we have seen in a long time."

One of the biggest sticking points during contract talks was the fate of several U.S. factories that GM has slated for closure. The UAW and GM also clashed over the company's use of temporary workers and whether to shorten the eight-year timetable for new hires to reach the top wage of about $30 an hour.

The UAW went into these negotiations looking for a larger share of the company's record profits and to guarantee their workers had a place in GM's future plans to build more electric cars. Union leaders are worried that because it takes fewer workers and parts to assemble a battery-powered car, the industry move to electric vehicles could put union jobs at risk.

As a compromise, GM's original offer to the UAW included a new electric-car battery factory near its idled assembly plant in Lordstown, Ohio, that would employ several hundred workers. Additionally, GM hopes to sell the assembly plant to a startup that plans to build electric pickup trucks there.

Ben Foldy contributed to this article.

Write to Mike Colias at Mike.Colias@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
FIAT CHRYSLER AUTOMOBILES 0.06% 13.262 End-of-day quote.4.57%
GENERAL MOTORS COMPANY 0.65% 35.54 Delayed Quote.6.25%
HUDSON'S BAY COMPANY -0.98% 9.13 Delayed Quote.25.24%
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EBIT 2019 8 580 M
Net income 2019 6 281 M
Finance 2019 4 076 M
Yield 2019 4,36%
P/E ratio 2019 8,06x
P/E ratio 2020 5,73x
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EV / Sales2020 0,29x
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