Workers represented by the United Auto Workers union approved on Wednesday a four-year labor contract with General Motors Co, the first such deal for the top U.S. automaker since its 2009 bankruptcy.
Ratification of the GM deal, which covers 48,500 hourly workers, paves the way for the UAW to complete talks with GM's crosstown rival, Ford Motor Co. Talks are also under way at Chrysler Group LLC, which is controlled by Fiat SpA.
GM said the contract would allow it to break even if U.S. auto sales plunged by just over 15 percent from the still-weak levels of 2011 and boost its costs by only $20 million annually in 2012 and 2013.
GM executives said the contract would increase labor costs by about 1 percent annually. Still, the agreement leaves GM with U.S. factory labor costs that remain less than a third of what they had been in 2005.
That makes it the leanest deal that the company has negotiated in four decades with the UAW, excluding a pair of deals since 2007 when GM was sliding toward collapse.
Even from a glass-half-empty perspective, we struggle to see how an investor could argue that GM did not achieve a very good outcome, Morgan Stanley analyst Adam Jonas said in a research note.
Union-represented workers, who have not had a base pay increase since 2003, voted overwhelmingly to ratify a deal that would save more than 6,000 U.S. factory jobs, raise wages for entry-level employees and pay each worker at least $11,500 in bonuses over the four years.
The UAW estimated the deal would create another 57,600 jobs at suppliers and other auto-related businesses.
The world really has changed and what you're seeing is a tradeoff between job security in lieu of pay increases, said Peter Bible, a partner-in-charge at accounting firm EisnerAmper LLP and a former GM accounting officer.
GM executives, who briefed Wall Street analysts on the deal for the first time on Wednesday, noted that the contract was the first to avoid an increase in pension costs since 1953.
The deal will cost GM $215 million from 2011 to 2013, which Bible said was multiples lower than in years past.
In a further concession, the UAW and GM also agreed to discuss the risk of the automaker's underfunded pension plan, one of the few issues left unaddressed by GM's restructuring directed by the Obama administration. Executives declined to comment on potential pension buyouts.
The UAW said 65 percent of GM production workers voted in favor of the deal, while 63 percent of skilled trades workers also backed it.
Shares of GM closed down almost 4 percent on Wednesday at $20.41. The stock has lost 45 percent since the start of the year as concerns have mounted about the risk of a renewed economic slowdown.
GM said it expected to book a charge of $90 million this year to pay for buyouts of about 1,000 skilled trades workers. GM is reducing the number of those higher-paid workers that include pipe fitters and electricians and replacing them with lower-paid production workers.
Almost 6,000 GM skilled trades workers are eligible for retirement. Those workers will be given a $65,000 bonus if they retire before the end of March.
The focus for the UAW now shifts to Ford, the No. 2 automaker and the only one of the Detroit Three to have avoided a restructuring in bankruptcy.
Workers at Ford have pressed for a richer deal because of the automaker's faster turnaround and ability to have avoided the bailouts needed at GM and Chrysler.
UAW President Bob King has been involved in the talks each day this week at Ford, said Michele Martin, UAW spokeswoman.
She declined to predict whether the talks would wind down this week, which was the assessment given Monday by a UAW official.
In a phone message to workers Wednesday evening, Tony Vultaggio, the president of UAW Local 228 in Sterling Heights, Michigan, said some subcommittees had finished working-level negotiations outside the core questions surrounding workercompensation at Ford.
Last week, the union said it would turn its attention to Ford after failing to finalize a deal with Chrysler Group LLC, where the current contract has been extended until October 19.
In May, Chrysler repaid $7.6 billion in government loans stemming from its bankruptcy restructuring through a refinancing that helped cut its interest costs, but effectively swapped government loans with private ones.
In part because of its heavy debt load, Chrysler is eager to hold down its fixed costs beyond the 2015 expiration of the deal now being negotiated.
(Reporting by Ben Klayman and Bernie Woodall in Detroit, additional reporting by Deepa Seetharaman and Kevin Krolicki in Detroit; Editing by Lisa Von Ahn, Phil Berlowitz and Matthew Lewis)