Union OKs GM Canada Contract, Fiat Chrysler Next Up

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Just a week ago the Canadian division of General Motors Co. (NYSE: GM) reached a tentative four-year contract agreement with the country’s autoworkers union, Unifor. Union members voted on and approved the contract over the weekend by a margin of nearly two to one.

Unifor will now resume negotiations with Fiat Chrysler Automobiles N.V. (NYSE: FCAU), where the union’s main issue is further investment by the automaker in Chrysler’s plant in Brampton, Ontario. Once negotiations with Chrysler are completed, the union will begin negotiations with Ford Motor Co. (NYSE: F).

According to Automotive News, GM has agreed to invest $421 million in three Canadian facilities. Workers receive a lump sum signing bonus of about $4,500 in the first year and legacy workers get annual bonuses of $1,520 in each of the next three years. Some $300 million of the agreed investment will go to the company’s Oshawa, Ontario, plant which had been tabbed for closure in 2019.

Unifor president Jerry Dias said:

In the negotiations with GM, the union set clear objectives which we reached, including our top priority to secure investment and product for our members and the future of the auto industry. With Fiat Chrysler and Ford we will accept nothing less.

GM Canada also issued a statement:

This mutually beneficial new agreement will enable new product, technology and process investments that will preserve jobs and place our Canadian operations at the forefront of advanced manufacturing flexibility, innovation and environmental sustainability.

In exchange for the investment and pay agreements, the union conceded to the company’s plan to switch from a defined benefit pension plan for new workers to a defined contribution plan. The defined benefit plan remains in place for legacy workers.

The pay scale for new hires now begins at $15.90 an hour, up from $15.58, and wages will increase every year for 10 years until new hires reach the $25.96 hourly base rate for legacy workers.

GM Canada also said it is discussing “potential support agreements” with the provincial and federal governments in an effort “to help optimize the competitiveness” of its Canada operations. That almost certainly indicates that GM expects some tax breaks and other incentives to offset the concessions the company made.

GM stock closed down about 0.8% Friday, at $32.12 in a 52-week range of $26.69 to $36.88. Shares were inactive in Monday’s premarket session. The stock’s 12-month price target is $36.72.