UAW Reaches Tentative Labor Deal With GM -- 6th Update

Date : 10/16/2019 @ 10:49PM
Source : Dow Jones News
Stock : Fiat Chrysler Automobiles NV (FCAU)
Quote : 16.11  -0.08 (-0.49%) @ 9:02PM
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UAW Reaches Tentative Labor Deal With GM -- 6th Update

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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.

Union and company bargainers have been working for months to settle on a new labor contract for more than 46,000 UAW-represented factory workers at dozens of GM plants and facilities across the country.

The nationwide strike, the company's longest since 1970, will continue for now as union-hall leaders travel to Detroit to decide whether to end the walkout immediately or continue it until the contract is ratified by rank-and-file workers -- a process that could take a week or two. That decision is expected to come Thursday morning.

With U.S. auto-industry sales expected to decline in coming years, the resulting four-year contract will be pivotal in determining how both GM and the UAW navigate the market slowdown, with each side angling to lock in financial gains ahead of time.

The Detroit auto maker, the nation's largest by sales, is coming off one of its most profitable periods in history but is cutting costs and restructuring its business to prepare for an uncertain future and hefty investments in new technologies, such as electric and self-driving cars.

The UAW wants to ensure its members not only share in GM's recent fortunes through improved pay and other benefits, but also have a place in GM's longer-range bet on electric cars, which require fewer parts and workers to build.

Shares of GM rose 1.1% on Wednesday, to $36.65. The stock has dropped about 6% since the strike began.

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

As part of the new deal, GM has committed to invest around $7.7 billion in its U.S. factories over the four-year contract period, which would create or preserve about 9,000 jobs, according to people familiar with the agreement.

The company also separately has joined with outside companies to invest another roughly $1.3 billion in facilities near its Lordstown, Ohio, assembly plant, which the company hopes to sell to a startup electric-truck maker, the people said.

Those investments would create more than 1,000 additional jobs, including a new facility that would make battery cells for electric cars, they said.

The Detroit auto maker, in return, will move forward with plans to close or sell three now-idled U.S. factories, including the Lordstown plant, under the proposed terms. The closures will help GM's bottom line by boosting its manufacturing efficiency in the U.S., which has lagged behind competitors for years.

A fourth assembly plant in Detroit that was without future work will get a new electric pickup truck within the next four years to keep it open, the people said.

Additionally, the agreement includes wage increases of 3% in two years of the contract and 4% bonus payments in the other two years; a path to full-time employment for temporary workers; and no changes in the amount workers contribute toward their health-care benefits, the people said -- all major wins for the union.

The UAW was also successful in getting improved pay for newer hires, who under this latest deal would reach the top wage of about $30 an hour faster than the eight-year period now, 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.

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 latest round of contract 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 GM work stoppage, now in its 31st day, has caused parts shortages at dealer repair shops, stifled production at 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.

UAW President Gary Jones is under pressure to score a major win. The union is losing membership and a multiyear federal corruption investigation has continued to ensnare top-ranking union leaders, eroding the trust of many rank-and-file members.

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.

Still, 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."

Ben Foldy contributed to this article.

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

 

(END) Dow Jones Newswires

October 16, 2019 18:34 ET (22:34 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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