US Markets
Monday, October 30th, 2023 2:01 pm EDT
Key Points
- GM-UAW Agreement Ends Contentious Bargaining Talks: General Motors (GM) and the United Auto Workers (UAW) have reached an agreement that brings an end to more than six weeks of labor strikes and collective bargaining negotiations with Detroit automakers. This deal marks the conclusion of historically contentious talks, with tens of thousands of workers across the U.S. participating in strikes after failing to reach agreements by the September 14 deadline.
- Contentious Negotiations and Tentative Agreements: Ford Motor was the first of the Detroit automakers to reach a tentative agreement with the UAW, followed by Chrysler-parent Stellantis. The tentative agreements, which are set to last four and a half years, include significant economic aspects such as a 25% wage increase. This substantial wage boost increases the top wage to over $40 per hour, with a 68% increase for starting wages, bringing them to over $28 per hour. These agreements also reintroduce cost-of-living adjustments, reduce the path to top wages from eight years to three years, and allow the right to strike over plant closures, among other enhanced benefits. The GM deal is reported to match these improvements.
- Significant Costs Incurred by Strikes and Uncertain Impact on Companies: The strikes, collectively involving GM, Ford, and Stellantis, have resulted in substantial financial losses for the automakers due to lost production, costing them billions of dollars. For instance, Ford estimated that the UAW strike had cost the company $1.3 billion. If the newly reached deals are ratified by the members, they are expected to increase labor costs by approximately $850 to $900 per vehicle produced. It’s unclear how much these labor agreements will ultimately increase labor costs for the companies. The automakers had expressed concerns that acquiescing to all of the union’s demands could affect their competitiveness and long-term viability. According to Deutsche Bank estimates, the overall cost increase for the agreements is projected to be $6.2 billion at Ford, $7.2 billion at GM, and $6.4 billion at Stellantis. The UAW adopted a more confrontational and strategic approach during these negotiations, deviating from the traditional method of bargaining with each automaker individually and pattern agreements off a leading tentative agreement.
The United Auto Workers (UAW) and General Motors (GM) have reportedly reached an agreement, marking the end of over six weeks of contentious collective bargaining negotiations with Detroit automakers. This development follows labor strikes that began in the United States after the parties failed to reach agreements by the September 14 deadline. Ford Motor was the first to reach a tentative agreement with the UAW, followed by Chrysler-parent company Stellantis, and now GM.
The negotiations between GM and UAW transpired overnight and into the early morning, ultimately leading to the reported deal. The specific details of the agreement have not been disclosed officially as of yet, and both the UAW and GM declined to comment on the matter.
The tentative agreements reached between the UAW and the three major American automakers are set to last four and a half years. The economic aspects of these deals, including wage increases, are modeled after the initial agreement between Ford and the UAW.
Notable highlights of the agreements include a 25% wage increase, which would raise the top wage to over $40 per hour. Starting wages are also set to increase by 68% to over $28 per hour. Additionally, the agreements reinstate cost-of-living adjustments, reduce the path to top wages from eight years to three years, and grant the right to strike over plant closures, among other significant benefits. It’s worth noting that the GM deal is expected to match these improvements.
The strikes have taken a substantial toll on GM, Ford, and Stellantis, collectively resulting in billions of dollars in lost production. Ford, for example, reported that the UAW strike cost the company approximately $1.3 billion, and if ratified, the new agreement is projected to increase labor costs by around $850 to $900 per vehicle produced. GM stated that the strike had cost them about $800 million.
These proposed agreements represent a significant milestone for the UAW, as they include substantial improvements in wages and benefits, setting a new record for the union’s agreements with automakers. The UAW took a more confrontational and strategic approach during these negotiations compared to recent history. Instead of bargaining with each automaker individually and selecting a lead company to pattern other deals off of, they initiated negotiations with all three automakers simultaneously.
While it’s not immediately clear how much these labor agreements will increase labor costs for the companies, they had previously argued that meeting all of the union’s demands could impact their competitiveness and long-term viability. Deutsche Bank estimated that the cost increase over the agreement’s term could be around $6.2 billion for Ford, $7.2 billion for GM, and $6.4 billion for Stellantis.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/30/gm-uaw-tentative-agreement-labor-strike.html
