Detroit General Motors Corp. won its struggle to unload $51 billion in retiree health costs and improve competitiveness in the latest round of contract talks with the United Auto Workers, but not without a short-lived strike that wrung promises out of GM to keep jobs at U.S. plants.
The two sides tentatively agreed Wednesday to a groundbreaking agreement that allows GM to move its unfunded retiree health care costs into an independent trust administered by the UAW. The union also agreed to lower wages for some workers. In exchange, the UAW won commitments from GM to invest in U.S. plants, bonuses and an agreement to hire thousands of temporary workers that will boost UAW membership, according to a person who was briefed on the contract. The person requested anonymity because the details haven't been publicly released.
Wall Street applauded news of the deal, sending GM shares up more than 9 percent.
The union said the agreement with the nation's largest automaker was reached shortly after 3 a.m. The UAW canceled its two-day strike about an hour later and workers were back in GM's 80 U.S. facilities Wednesday afternoon. GM lost production of around 25,000 vehicles due to the strike, according to CSM Worldwide Inc. Analysts had suggested a short strike could actually improve GM's outlook because it would cut back on inventory levels.
GM shares rose $3.22, or 9.4 percent, to $37.64. Standard & Poor's Ratings Services said it may raise GM's long-term debt rating, which is currently below investment grade.
"We view the tentative agreement and its apparent terms as a historic milestone toward the long-term improvement in fundamentals and survival at the North American automakers," KeyBanc analyst Brett Hoselton wrote in a note to investors.
The agreement is expected to set a pattern for contracts that now will be negotiated at Ford Motor Co. and Chrysler LLC. UAW President Ron Gettelfinger said he will decide this week which automaker will go next. The UAW may even conduct negotiations with Ford and Chrysler simultaneously, Gettelfinger said during an interview on a radio show.
The GM contract will be reviewed by local UAW presidents this week and will be subject to a vote of GM's 74,000 rank-and-file members. Voting is expected to begin this weekend, Gettelfinger said. If members vote against the agreement they could go back on strike, but Gettelfinger said he's confident it will be ratified.
"We're very comfortable with this agreement and we're happy to be able to recommend it to our membership," Gettelfinger said.