The new contract agreement between General Motors and the United Auto Workers is setting several historic precedents, including the creation of a new class of workers who will be paid half the current rate. The UAW had traditionally insisted that all its members be paid equally. The contract states that new employees will begin in "non-core" janitorial and maintenance roles at a rate of $28 per hour in salary and benefits. They will move to the higher, $51 per hour tier when they advance to assembly-line or other higher-rated work. The two-tier pay system ranks with the shifting of member healthcare benefits to a trust managed by the union itself as a turning point in the UAW's relationship with its Detroit employer. "This is a really big deal," said David Lipsky, Cornell professor of collective bargaining. "The UAW has always prided itself in being an egalitarian organization: 'We all hang together, with equal treatment for everyone.'" The changes will help GM narrow a $25-30 per hour cost gap with Toyota's U.S. workers. The agreement will not take effect until it is ratified by UAW's members, but ratification is expected. "The company likes [the contract] because it cuts compensation costs, and the union can swallow it because the people affected aren't going to vote because they don't exist yet," said Richard Block, a labor professor at Michigan State University.
Sources: Bloomberg, Wall Street Journal
Commentary: UAW / GM Reach Tentative Agreement; Strike Halted • Why the GM Strike Makes Sense • The General Motors-UAW Dance
Stocks/ETFs to watch: GM. Competitors: F, DAI, TM. ETFs: PRFG, RPV
Earnings call transcript: General Motors Q2 2007
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