Factory workers at General Motors have overwhelmingly approved a new four-year contract with the company that includes profit-sharing instead of raises for most workers and promises thousands of new jobs.
The United Auto Workers union said Wednesday that 65 percent of production workers voted for the deal, while 63 percent of skilled-trades workers such as electricians were in favor. Voting by GM's 48,500 blue-collar workers ended on Wednesday.
GM was the first company to reach a deal with the union, which is now negotiating with Ford Motor Co. and Chrysler Group LLC. The GM pact is a template for the others, but there will be differences. The deal sets pay and benefits for more than 112,000 auto workers nationwide, and influences pay at foreign-owned auto plants in the U.S., auto parts supply companies and for other manufacturing businesses.
The contract will lower labor costs to one-third of what they were in 2007 and hold pension costs flat for the first time in almost 60 years. It will also give GM a chance to clear out older workers and replace them with less-expensive new hires, the company said.
Under the deal, which runs through September of 2015, most workers won't get annual pay raises. But they'll get $5,000 signing bonuses, profit-sharing checks and other payments that total at least $11,500 during the next four years. GM also promised to add at least 5,100 jobs. The contract also compensates workers for meeting quality standards, a key priority for the company, CEO Dan Akerson said.
Entry-level workers who now make a base wage of around $15.78 per hour will get 22 percent raises. GM currently has about 1,900 entry-level workers who make about half the pay of longtime UAW members.
Pressure is now on for Ford and Chrysler to reach agreements with the union. A top Ford negotiator said Monday that he was optimistic about reaching a deal by the end of this week. UAW President Bob King is involved in the talks at Ford, the union has said. Negotiations with Chrysler also are continuing.
The deal cuts GM's factory worker labor costs to $5 billion per year, less than a third of the $16 billion the company paid in 2005, Chief Financial Officer Dan Ammann said. The figure was $11 billion in 2007, as the company headed into bankruptcy protection and needed a government bailout to survive.
GM also won't have to pay a pension increase for the first time since 1953, helping the company shore up its under-funded pension plans, GM said.
The automaker will save $50 million this year and $145 million in future years because the deal allows it to stop paying for factory workers' legal services.
The legal costs and early retirement programs will offset some of the profit-sharing and other costs. GM expects the net cost of the deal to be $175 million this year but only $20 million annually in future years.
Under the agreement, GM must make $1.25 billion before taxes and interest in North America before profit-sharing checks are issued, and profit-sharing is capped at $12,000 per worker if GM makes $11.75 billion or more. Under the old formula, there was no cap, Ammann said.
The deal also includes offers for older employees to leave so it can hire new ones at the entry-level wage. Eligible workers can get up to $10,000 if they retire within the next two years. There's also a $65,000 bonus for skilled-trades workers such as electricians if they retire or leave the company between Nov. 1 and March 31.
GM expects 1,000 skilled trades workers and up to 1,000 production workers to take the exit packages. They would be replaced by laid-off workers and new hires who would make the lower wages.
GM can break even under the new contract even if U.S. auto sales slump to 10.5 million vehicles in a given year. Sales are running at an annual rate of 12 million so far this year.
GM's stock fell 78 cents, or 3.7 percent, to close at $20.62 on Wednesday as the broader market declined. The stock price has fallen more than 37 percent since GM's initial public stock offering at $33 per share in November.