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General Motors workers ratify new labor contract

- Associated Press - Wednesday, September 28, 2011

DETROIT — Factory workers at General Motors have overwhelmingly approved a new four-year contract with the company that has profit-sharing instead of pay 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 other companies, but there will be differences. The deal sets the pay and benefits for more than 112,000 auto workers nationwide, and it also sets the bar for pay at foreign-owned auto plants in the U.S., auto parts supply companies and for other manufacturing businesses.

It also will have a relatively small impact on GM's profits, unlike UAW contracts from the past.

Under the deal, which runs through September of 2015, most of the 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.

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.

GM can break even under the new contract — even if U.S. auto sales slumped to 10.5 million vehicles in a given year. Sales are running at an annual rate of 12 million so far.

The contract also compensates workers for meeting quality standards, a key priority for the company, CEO Dan Akerson said.

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 Amman said. The figure was $11 billion in 2007, as the company headed into bankruptcy protection and needed a government bailout to survive.

GM also has no pension increase for the first time since 1953, helping GM to shore up its under-funded pension plans, the company said.

GM 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, Amman said.

The deal also includes offers for older employees to leave so it can hire new ones at 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 make the cheaper entry-level wage.

Shares of GM fell 43 cents, or 2 percent, to $20.76 in late-day trading as the broader markets declined. The shares have fallen 36 percent since GM's initial public stock offering at $33 per share in November.

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