GM Workers Ratify UAW Deal

Zacks

Workers at General Motors Co. (NYSE: GM - News) have ratified the 4-year United Auto Workers (UAW) deal as majority of the workers voted for the same. Among the 48,500 workers, 65% of production workers, and 63% of skilled-trade workers voted for the deal.

Most of the workers, except at the entry-level, would not get annual pay raises, but signing bonuses totaling $5,000, profit-sharing checks and other payments amounting to at least $11,500 during the tenure of the deal.

Wages of entry-level workers would be increased 22% from the current $15.78 per hour. GM currently employs about 1,900 entry-level workers.

The deal would also save more than 6,000 U.S. jobs and create another 5,100 jobs at GM plants. The UAW estimated the deal would also add another 57,600 jobs at suppliers and other auto-related businesses.

GM estimated the net cost of the deal would be $175 million this year but only $20 million annually in the future. With this, the company will save $50 million this year and $145 million in future years as it would no longer need to pay for factory workers’ legal services under the deal. As a result, factory worker costs would be reduced to $5 billion per year from $16 billion in 2005 and $11 billion in 2007.

Buyout

GM also plans to buyout its old high-wage workers in order to replace them with low-wage workers. They can get up to $10,000 if they retire within the next two years.

Moreover, the skilled workers (include pipe fitters and electricians) will be given a $65,000 bonus if they retire between November 1, 2011 and March 31, 2012. As of now, about 6,000 skilled workers are eligible for retirement. GM expects to incur a charge of $90 million this year to pay for buyouts of about 1,000 skilled trades workers.

Conclusion

The deal would help GM break even if U.S. auto sales dipped to 10.5 million vehicles in a given year. In 2011-till date, sales are estimated at an annual rate of 12 million vehicles.

After GM, UAW would now turn to its hometown rival, Ford Motor Co. (NYSE: F - News) and then to Chrysler Group LLC, controlled by Italy’s Fiat SpA (Other OTC: FIATY.PK - News), to reach a deal.

Workers at Ford have asked for a richer deal due to the automaker's faster turnaround and ability to avoid bailout unlike GM and Chrysler. Last week, UAW failed to strike a deal with Chrysler, with whom the current contract has been extended until October 19.

GENERAL MOTORS CO (GM): Read the Full Research ReportFORD MTR CO DEL (F): Read the Full Research ReportZacks Investment Research
View Comments (0)