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UAW will keep GM strike going while members vote on new contract

Stock MarketsOct 17, 2019 06:12PM ET
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© Reuters. Striking United Auto Workers (UAW) members rally in front of General Motors World headquarters in Detroit

By Paul Lienert and David Shepardson

DETROIT/WASHINGTON (Reuters) - The United Auto Workers union said on Thursday workers at General Motors Co (NYSE:GM) will stay off the job while they vote on a proposed contract that delivers higher pay for full-time workers and better terms for temporary workers, but allows the automaker to close three U.S. plants.

Union leaders are giving the 48,000 striking workers until Oct. 25 to vote on the contract terms, but have recommended ratification of the deal.

The decision to keep the strike going for another week reflects the pressure on top UAW leaders amid a continuing federal corruption probe of the union. Disappointment among rank and file at the failure to prevent the plant shutdowns and block GM from moving work to Mexico could be challenges for union leaders as they seek to have the deal ratified.

In 2015, rank and file UAW workers at Fiat Chrysler Automobiles NV rejected the first version of a contract. This time, UAW leaders are keeping workers on strike pay of $275 a week while they decide on the tentative agreement.

"Our members will make this decision," UAW spokesman Brian Rothenberg said at a press conference at the Detroit building where GM is based. "It is their contract. It is in their hands.”

GM hopes the deal can be approved expeditiously. "We encourage the UAW to move as quickly as possible through the ratification process, so we can resume operations and get back to producing vehicles for our customers," the company said in a statement.

GM shares closed down 1.3% at $36.19 on Thursday, after a modest rally on Wednesday following the UAW's announcement it had reached a tentative contract deal.

On Wall Street, reaction to the proposed agreement, the highlights of which the union released, has been muted. "We continue to believe that if this is ratified, it is a fairly solid outcome for GM," RBC Capital Markets analyst Joseph Spak wrote in a note Thursday. "The financial implications of the deal don’t look too onerous."

The strike began on Sept. 16, with UAW negotiators seeking higher pay for workers, greater job security, a bigger share of profit and protection of healthcare benefits. Other issues included the fate of plants GM has indicated it may close, the use of lower-paid temporary workers and GM's production of vehicles in Mexico.

The strike cost GM an estimated $2 billion according to analysts, hurt auto suppliers and played a role in U.S. manufacturing output falling more than expected in September.

The longest nationwide strike against a Detroit automaker since 1970 became a political event. Democratic presidential candidates joined UAW picket lines, eager to win union votes in Midwest swing states. For his part, U.S. President Donald Trump put pressure on GM Chief Executive Mary Barra before the strike to preserve jobs at a car plant in Lordstown, Ohio, that she had targeted for closure. The White House did not comment.

However, under the deal, GM will move ahead with closing Lordstown and two parts plants in Baltimore and Warren, Michigan. Workers from Lordstown on Thursday were outside GM's Detroit headquarters, where UAW leaders were meeting, to protest the planned agreement.

GM also appears to have dodged a significant addition to its long-term balance sheet liabilities by agreeing to make a one-time cash distribution to UAW members eligible for pensions.

The union said GM has agreed to put "new product" in the company's Detroit-Hamtramck assembly plant as part of the deal. Details were not provided in the UAW summary but sources have said the plant will build electric trucks.

Separate from the UAW deal, GM on Thursday confirmed plans for an electric battery plant near the Lordstown complex that could eventually employ 1,000 people. Sources have said the battery plant would be a joint venture, where the workers are represented by the UAW and earn in the range of $15 to $17 an hour.

LORDSTOWN'S DISPLACED WORKERS

GM has said it plans to sell the Lordstown plant to a group affiliated with electric truck startup Workhorse Group Inc that would initially employ 400 people - barely a tenth of the workforce Lordstown had when it was operating on three shifts. A Workhorse spokesman could not immediately be reached for comment.

A group of workers from the Lordstown plant stood outside the hotel ballroom where UAW leaders were meeting on Thursday, reading the UAW summary of the contract on smartphones. The Lordstown workers, some wearing red shirts with the slogan “Stop Building in Mexico,” said they were not satisfied with what they saw.

Scott Gearhart, who worked for 26 years at Lordstown, said he is now working at GM's Wentzville, Missouri, pickup truck assembly plant, living in an apartment and driving 10 hours to go home on days off. “I have my family at home. My mom’s by herself,” Gearhart said, explaining why he has not moved.

Tommy Woliko looked up from reading the contract summary on a smartphone. “I’m looking for something that says we’re not losing jobs to Mexico,” he said. “I see nothing.” Woliko worked for 11 years at Lordstown before moving to GM’s heavy duty pickup truck plant in Flint, Michigan.

“It’s a very good experience working there,” Woliko said. “But it’s not home.”

GM also is moving ahead with plans to invest $9 billion in the United States over the life of the next UAW deal, sources said. It also would create or retain 9,000 UAW jobs, a substantial number of which would be new, a person familiar with the plans said. The UAW contract summary did not address these figures.

The UAW’s summary of the contract terms did not include details of which GM plants would be receiving shares of the $7.7 billion in direct investments the company has outlined. In 2015, the UAW listed plants that would be getting investment and jobs in its contract summary. UAW spokesman Rothenberg said some of the investments in the current deal were not included in the national agreement.

As part of the push to protect jobs, the UAW said it will jointly form a committee with GM that would meet at least quarterly to discuss the impact of technologies like electric and self-driving vehicles and their impact on UAW members. This group would address instances where work has shifted out of the union due to new manufacturing processes.

The UAW has expressed concern it could lose thousands of workers at engine and transmission plants operated by the Detroit Three automakers as the companies launch more electric vehicles in coming years.

If the deal is approved by the workers, the union will next begin negotiations with Ford Motor (NYSE:F) Co or Fiat Chrysler, covering many of the same issues. The UAW previously agreed to temporary contract extensions with both automakers while it focused on GM.

UAW will keep GM strike going while members vote on new contract
 

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