DETROIT (Reuters) - Negotiators for the United Auto Workers and General Motors Co (GM.N) reached a tentative agreement on undisclosed terms for a new four-year labor contract, averting a threatened strike, the union said late on Sunday night.
The proposed deal will now go to a council of several hundred UAW leaders from GM’s U.S. plants meeting on Wednesday, who are expected to approve it. The contract then goes to a ratification vote of the UAW’s 52,700 workers at GM. Last week, the union’s new contract with Fiat Chrysler Automobiles NV (FCAU.N) (FCHA.MI) was overwhelmingly ratified by worker vote.
“We believe that this agreement will present stable long-term significant wage gains and job security commitments to UAW members now and in the future,” said UAW President Dennis Williams. “We look forward to presenting the details of these gains to local union leaders and the membership.”
GM confirmed in a separate statement that it had reached a tentative accord with UAW negotiators. “The new UAW-GM national agreement is good for employees and the business,” Cathy Clegg, head of North American GM manufacturing and labor, said in the statement.
Clegg also said the contract will give GM the flexibility “for the company to respond to the needs of the marketplace.”
One of GM’s key goals in the talks was to make sure that the agreement would not saddle it with high fixed costs that could overburden the company if the cyclical automotive industry takes a downturn.
The industry sits at the top of that business cycle now, as U.S. auto sales are seen hitting 17.3 million vehicles this year. That’s well up from the 10.4 million vehicles sold in 2009 in the depths of recession when GM went through a government-sponsored bankruptcy and bailout.
While details of the GM-UAW pact were not released, the Fiat Chrysler contract set a pattern that was used for GM and is expected to also set the broad outlines of a deal with Ford. The latter is expected to come to the table with the UAW after the worker ratification vote at GM.
A key tenet of the Fiat Chrysler deal was the elimination of a strict two-tier wage system that paid newer hires considerably less than veteran workers, without a clear path to top pay.
The Fiat Chrysler deal set an eight-year path from hiring to top pay, which goes from $17 per hour to nearly $30 per hour. Fiat Chrysler workers hired after 2007 won a ratification bonus of $3,000, and those hired before 2007 got $4,000 bonuses.
GM has fewer so-called “second-tier” workers in a two-tier pay structure created in 2007. GM has about 20 percent second-tier workers, compared with 45 percent at Fiat Chrysler and 28 percent at Ford.
In the talks, GM’s negotiators also wanted to reduce a labor cost disadvantage compared with Fiat Chrysler, since GM has fewer second-tier workers. GM executives have said any labor accord could not come at the price of threatening the company’s newly achieved 10 percent North American operating profit margins.
GM’s labor costs going into this year’s talks were higher than Fiat Chrysler‘s, the Center for Automotive Research said. It put GM U.S. labor costs at $55 per hour, compared with $47 per hour at Fiat Chrysler.
Ford has per-hour U.S. labor costs of $57, the Center for Automotive Research says.