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GM’s Tentative Deal With UAW Paves Way for Key Strike Vote

David Welch and Keith Naughton
GM’s Tentative Deal With UAW Paves Way for Key Strike Vote

(Bloomberg) -- General Motors Co. and the United Auto Workers reached a tentative agreement on a new contract, clearing the way for a union vote Thursday on whether to continue a more than month-long strike.

The accord reached Wednesday may bring an end to the union’s longest national walkout against the carmaker in almost a half century. It includes $9 billion in investment in U.S. plants, 9,000 new or retained jobs and signing bonuses exceeding the $8,000 workers got four years ago, people familiar with the matter said. Workers will get 3% pay raises in some years of the contract and 4% lump-sum payments in the others.

“The number one priority of the national negotiation team has been to secure a strong and fair contract that our members deserve,” UAW Vice President Terry Dittes said in a statement. He said the union’s bargaining committee recommends that the GM National Council -- comprised of presidents and chairmen from locals around the country -- vote in favor of putting the deal up for a ratification vote.

GM confirmed a tentative agreement had been reached, but neither the company nor the union provided details on what’s included in the deal. GM shares rose as much as 2.6% to $37.22, the highest intraday in two weeks.

The stakes were rising for both sides as the strike entered a fifth week, costing GM billions, forcing workers to live on $275 a week and denting the economy in Michigan and the Midwest. Analysts at Bank of America Merrill Lynch estimate the strike has cost GM about $2 billion of earnings, and its striking workers may have lost $2,000 of profit sharing and as much as $4,000 in take-home pay.

The walkout also become a national political issue, coming up during Tuesday night’s Democratic presidential debate in Ohio, which has lost thousands of auto industry jobs.

Speed Up

If the UAW decides to continue the strike until the deal is ratified, the union may be pressured to expedite the process, said Art Schwartz, a former GM labor negotiator.

“If they keep them out, I’m sure they will speed ratification up,” said Schwartz, who’s now a consultant in Ann Arbor, Michigan. “Usually, it takes about two weeks, but it doesn’t have to, they can do it quicker and I think they would.”

After exchanging blame last week, GM and the union made rapid progress over the weekend. Chief Executive Officer Mary Barra and President Mark Reuss showed up in person at the main bargaining table on Tuesday. And in an early sign a possible deal was in the works, UAW bosses summoned local presidents and chairmen to Detroit for a meeting Thursday.

What Bloomberg Intelligence says:

“GM will likely shrug off the near-term supply constraints and earnings reduction of a strike-ravaged 3Q. Depending on the conditions, the cost of the next contract over four years carries the greater risk of making the automaker uncompetitive if U.S. demand ebbs.”

-- Kevin Tynan, senior autos analyst

Click here to read the research

GM and union officials reached a key compromise on a path to full-time employment for temporary staffers after three consecutive years of work, people familiar with the situation said. The treatment of temps, some of whom have worked at GM for as long as four years, had been one of the most contentious issues standing the way of a deal.

The automaker said last week that it was willing to increase wages and lump sum payments, preserve health-care benefits, remove a cap on how much profit sharing is paid out based on earnings and boost ratification bonuses.

Read more: In GM Strike, Old Grievances Retooled for a New Era

The UAW’s national council will decide Thursday whether to recommend the agreement for a ratification vote and if the strike will continue while members cast ballots.

“If they don’t feel confident in their ability to get it ratified, they may just say ‘we’re going keep them out on strike until it’s ratified, because we’re not sure,” said Arthur Wheaton, director of the Worker Institute at Cornell University. “It will be a great temperature test to see whether or not they feel confident in the vote.”

Ratification Challenge

Getting the new four-year agreement approved by the rank-and-file could be a challenge. GM outraged union workers last year by threatening four U.S. plants with possible closure, though it’s offered to keep at least one of those factories open.

UAW leaders also have credibility problems. President Gary Jones was implicated last month by federal prosecutors in an indictment of a former confidant who conspired to embezzle member dues and spend the money on stays at luxury villas, golf gear and cigars.

Once the UAW’s GM membership ratifies the contract, the union will turn its attention to either Ford Motor Co. or Fiat Chrysler Automobiles NV. The UAW typically tries to use the first agreement as a pattern for the others. The union extended its contracts with Ford and Fiat Chrysler on Sept. 13 to focus on GM.

(Updates with details in second paragraph.)

To contact the reporters on this story: David Welch in Southfield at dwelch12@bloomberg.net;Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Melinda Grenier

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