GM General Motors Company

By Nora Naughton and Mike Colias 

The United Auto Workers scored major wins on wages, health care and temporary workers in its new tentative labor pact with General Motors Co., after calling a costly nationwide strike that has halted work at the company's U.S. factories.

But GM will move forward with plans to close three idled U.S. factories, including a plant in Lordstown, Ohio, that President Trump had pressed the company to keep open. GM intends to sell the Ohio factory to a startup electric-truck builder.

The strike will continue for now, pending a vote by a council of UAW labor leaders gathered in Detroit. These UAW officials will decide whether to end the strike immediately or continue it until the proposed contract is ratified by rank-and-file members. A decision was expected Thursday afternoon.

The strike, which is in its fifth week, is already the company's longest nationwide walkout since 1970.

The agreement struck by union and company bargainers Wednesday will move newer workers to the top wage in four years rather than the eight years now, provide wage increases and lump-sum bonuses of 3% to 4% in each year of the contract and give temporary workers full-time status after three years, according to details made public Thursday.

The proposed contract, covering more than 46,000 UAW-represented workers at GM, also includes a $11,000 bonus for full-time workers if the deal is ratified, as well as a $4,500 signing bonus for temporary workers, more than double their bonus in 2015.

The UAW succeeded in holding the line on health care, with the 3% contribution workers pay for their benefits unchanged. GM had entered into talks looking to increase the cost-share to help defray fast-rising medical costs that totaled roughly $900 million last year for its union-represented workforce.

While analysts say the deal is likely to increase GM's labor costs, the contract would also let GM trim excess factory capacity in the U.S., long a drag on its bottom line. The company won the formal go-ahead from the UAW to close three underused U.S. factories that had weighed on profits.

During contract talks, UAW leaders had pressed GM to move more factory production from Mexico to the U.S. -- even criticizing the company publicly for not supporting American workers -- but the agreement summary makes no such commitments.

Missing from the summary released Thursday by the UAW was a breakdown of the money GM will invest in U.S. factories, which the union has made sure to highlight in past contract deals.

As part of this agreement, GM has pledged roughly $7.7 billion in new investments for its U.S. factories, creating or preserving around 9,000 jobs, a UAW spokesman confirmed.

Kristin Dziczek, an economist and labor specialist at the Ann Arbor, Mich.-based Center for Automotive Research, said she was surprised the UAW didn't provide details on the new company investment. "That has been how they convey job security to workers," she said. "I don't know how that will go over."

The UAW didn't have an immediate comment on why those details weren't included in the summary.

The plant closures, announced last November, drew sharp condemnation from Mr. Trump and elected officials whose districts were affected. GM Chief Executive Mary Barra has made several visits to Washington, D.C., over the past year, in part to discuss the restructuring plans with lawmakers.

Mr. Trump called Ms. Barra Wednesday to discuss the agreement details, a GM spokesman confirmed, declining to elaborate. The president also spoke with UAW President Gary Jones, the union confirmed.

The factory cuts are central to a restructuring plan GM laid out last year, aimed at boosting cash flow by $6 billion annually. A fourth plant that GM had slated for closure will remain open, eventually to build an electric pickup truck, people close to the talks said.

"We see the agreement to close three out of the four plants initially targeted as a 'win' for GM, keeping their restructuring plan on track," said Jefferies analyst Philippe Houchois in an investor note Thursday.

Still, any increase in labor costs for GM will likely be replicated at Ford Motor Co. and Fiat Chrysler Automobiles NV, with the UAW bargainers seeking to use the GM contract as a template to reach similar agreements.

GM shares fell nearly 1% in afternoon trading Thursday. They have fallen about 6% since the strike began.

Analysts estimate the strike has eroded GM's bottom line by $2 billion or more, 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.

If approved by workers, the new GM-UAW labor pact will set the framework for how these two big institutions navigate an expected downturn in the U.S. car market and disruptive forces reshaping the auto business, from the emergence of electric cars to self-driving cars and ride-hailing ventures.

Still, winning their support isn't guaranteed. Ratification could face challenges, particularly because nearly half of GM's unionized workforce has never experienced an industry downturn and will be less inclined to accept concessions, labor experts said.

UAW officials entered negotiations already rattled by GM's decision to close the plants, driven in part by the company's need to steer capital toward bets on electric vehicles. Analysts say the long-term shift toward battery-powered cars is a threat to traditional factory jobs because they require fewer parts and less manpower to assemble.

GM bargainers during negotiations assured union leaders that UAW members would be in line for work and retraining related to new technologies like electric and autonomous vehicles, according to the union's summary of the contract.

A new committee of union and company officials will meet regularly to discuss new technologies and how they might affect the jobs of union workers, the union said.

Separate from the proposed contract, GM said Thursday it will invest with partners in a battery-cell plant near the Lordstown factory that would employ about 1,000 UAW-represented workers. The sale of the factory to the electric-truck maker should create around 400 jobs initially, the company said.

Write to Nora Naughton at nora.naughton@wsj.com and Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

October 17, 2019 15:43 ET (19:43 GMT)

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