As UAW Ratifies Labor Pact, GM Sees Big Savings Ahead

The United Auto Workers [UAW] rank-and-file membership voted convincingly in favor of the tentative agreement reached between the union and General Motors in late September. Among production workers, 66% voted yes, while 64% of skilled trades workers supported the pact. The accord was reached following a two-day strike. UAW President Ron Gettelfinger praised the union's steadfastness and "solidarity" and claimed a victory for "protecting jobs, wages and benefits for both active and retired General Motors workers -- and we helped protect middle-class manufacturing jobs in communities throughout the United States.” Gettelfinger's self-congratulatory assertions aside, the Wall Street Journal writes the deal may save GM as much as $4 billion a year, as it tries to close the $30-an-hour wage gap with Japanese competitors like Toyota. The Journal claims that "buried in the pages" of the accord, changes to workers' current pension and benefits plans, and more significantly, changes to what future GM employees can expect to receive, place compensation on par with what Toyota's U.S. workers receive. GM is expected to be able to replace 33% to 40% of its current UAW workforce within 4 years, through buyouts and 'forced' early retirements, meaning savings from the accord are just around the corner for the U.S.'s number one auto manufacturer by volume. GM shares have risen 30.5% over the last month.

Sources: Press Release, Wall Street Journal, AP, UAW Report
Commentary: GM, UAW Considering New Employee Buyouts • Analysts Doubt Advertised Savings in GM Deal • UAW / GM Reach Tentative Agreement; Strike Halted
Stocks/ETFs to watch: GM. Competitors: F, DAI, TM, HMC, NSANY
Earnings call transcript: General Motors Q2 2007

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