September 17, 2011 / 1:47 AM / 7 years ago

GM and UAW reach first labor deal since bankruptcy

DETROIT (Reuters) - General Motors Co and the United Auto Workers union reached a proposed contract for about 48,500 production workers that would create new U.S. factory jobs and include profit-sharing bonuses.

The proposed four-year contract, which must be ratified by rank-and-file workers, represents the first since U.S. taxpayers bailed out GM and Chrysler Group LLC in 2009.

Details of the tentative deal, reached late on Friday after seven weeks of negotiations, were being withheld until it could be reviewed by UAW officials from around the country at a meeting set for Tuesday in Detroit.

The proposed contract would recall about 570 GM workers currently on layoff, revive a now-idled assembly plant in Tennessee and pay one-time bonuses of about $5,000 for each current worker, a person with knowledge of the terms said.

UAW President Bob King said the union had also held the line against proposals from GM to shift more healthcare costs to workers. Union members pay between 5 percent and 7 percent of their healthcare costs, far less than most Americans or even their salaried counterparts, who pay upward of 30 percent.

The UAW chose to complete negotiations with GM first, before reaching a deal with Chrysler and finally turning to Ford Motor Co, people close to the talks said.

The contract talks in Detroit have played out at a time of increasing uncertainty about the strength of U.S. auto sales for the remainder of this year and in 2012, as well as concern about the risk of another recession.

The union had surrendered the right to strike GM or Chrysler as part of the bankruptcies for the automakers brokered by the Obama administration.

“As America struggles with record levels of unemployment, we aimed to protect the jobs of our members — to guarantee good American jobs at a good American company. And we have done that,” King said in a statement.

GM said it expected the union would complete ratification votes within a week to 10 days.

The timing is key because King and other union officials are expected to remain focused on winning approval for the GM contract before turning their attention to the negotiations with Chrysler, which is controlled by Fiat SpA.


The UAW’s four-year contracts with all three Detroit automakers expired late on Wednesday. The automakers and the union extended contract terms indefinitely as negotiations continued.

At stake in the Detroit contract talks are wages and benefits for about 112,500 unionized U.S. auto workers who have gone without a base pay increase since 2003.

The contract terms will also set a key benchmark for wages at auto parts suppliers and at nonunion plants operated by Asian and German automakers in the southern United States.

Harley Shaiken, a University of California at Berkeley labor professor and a confidant of King, said the GM contract was significant in part because of the weak U.S. economy.

“This isn’t just a contract between a company and a union,” he said. “It is a company and a union amidst the worst economic downturn we’ve had since the 1930s.”

There was no mention from either side of increases in base wages or cost-of-living increases for veteran workers. The UAW had sought both, but King and other union officials had cautioned that winning traditional pay increases would be unlikely.

The UAW has made wage increases for entry level or “second tier” workers a priority in these talks. Those workers are paid about $30,000 a year before overtime, compared with $100,000 or more that some veteran workers had made with overtime at the height of the SUV boom at the end of the 1990s.

Executives at GM have said the ability to hire workers at the lower wage and the weaker dollar opened the door to exporting more vehicles from U.S. factories to overseas markets, reversing a trend decades in the making.


The proposed GM deal would move production of a new vehicle to the automaker’s now-idled assembly plant in Spring Hill, Tennessee, a person with knowledge of the deal said.

The one-time contract-signing bonuses of around $5,000 for each worker amount to a total cost of about $245 million for GM, the source said.

GM and the other two Detroit automakers offered the bonuses and profit-sharing rather than traditional wage increases in an effort to avoid the kinds of fixed costs that contributed to the industry’s near collapse two years ago.

A bonus of $5,000 would be between the $3,500 proposal GM made early in the talks and the $7,000 or more that the UAW had sought. GM workers got a $3,000 one-time bonus in 2007.

It was not clear how many of the new jobs would be at the entry-level wage of about $15 per hour, roughly half what veteran production workers are paid. The automakers have looked to use more workers at that lower wage rate to bring down overall labor costs.

The Detroit Free Press said the proposed contract also included new investment by GM to create jobs at powertrain plants in Romulus and Warren, Michigan, and in Wentzville, Missouri, where GM has a stamping and an assembly plant.

In his statement, King said the GM contract would shift production jobs “back to the United from other countries,” a major goal for the union in the talks.


Winning contract deals at Chrysler and Ford may be more difficult.

There is outright tension between the UAW and Chrysler Chief Executive Sergio Marchionne, who lashed out at King for skipping a meeting that had been set for Wednesday as the prior contract expired for 26,000 UAW-represented Chrysler workers.

At Ford, many workers are hoping for a better deal because of stronger profitability at the No. 2 U.S. automaker. Ford funded its turnaround on its own, avoiding bankruptcy. As a result, UAW workers at Ford retained the right to strike.

Analysts have said getting a Ford contract ratified will be a challenge to King and other UAW leaders.

Workers rejected a round of concessions that King had negotiated with Ford in late 2009, which the automaker had said at the time were needed to keep it competitive.

The UAW has hoped to use new labor agreements with the Detroit automakers as a springboard to winning first-ever contracts to represent workers at U.S. factories operated by Japanese, Korean and German automakers.

Writing by Kevin Krolicki and Deepa Seetharaman; Editing by Vicki Allen

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