The new four-year contract between General Motors Co. and the United Auto Workers union will bring only a minimal increase in fixed costs for the automaker, a person briefed on the talks said Monday.
The agreement, reached late Friday, includes a $5,000 signing bonus and the possibility of sweeter profit-sharing checks for GM's 48,500 factory workers, but most of them aren't likely to see a pay raise.
Because recurring costs were contained, GM still will be able to break even in a depressed U.S. auto sales market of around 10.5 million, said the person, who asked not to be identified because terms of the deal haven't been released to union members.
The UAW and GM would not give details of the contract.
GM shares fell 20 cents to $22.41 in trading early Monday, about 32 percent below the initial public offering price of $33 per share in November. The shares have traded as low as $20.88 recently, but hit more than $39 not long after the IPO. Monday's decline was in line with the overall market. The Dow Jones industrial average was down nearly 2 percent on worries about government debt problems in Greece.
Union leaders from factories across the nation will be in Detroit on Tuesday to hear UAW President Bob King and other leaders explain the contract terms. Workers must vote on the deal before it can take effect. That will take place in the next week or so.
People briefed on the agreement said it also includes a $2- to $3-per-hour pay raise for entry-level workers over the life of the contract and guarantees of more union jobs. GM now has around 2,400 workers making the entry-level wage of $14 to $16 per hour, about half the pay for longtime UAW workers.
None of the people wanted to be identified because the terms have not been explained to union members.
Citi analyst Itay Michaeli wrote in a note to investors Sunday that the deal appears to fall in line with earlier expectations and shouldn't meaningfully affect the GM's stock.
Michaeli wrote that based on what he has heard so far, it appears that the new deal won't change a whole lot for the Detroit automaker and won't meaningfully alter its break-even point.
"Thus, we view the contract as a neutral to the stock, particularly in today's volatile macro environment," Michaeli wrote in a note to investors.
The analyst noted that GM's labor costs last year were less than a third of what they were just five years ago, so small changes to them won't affect its profits the way that they once did.
If approved, the GM contract will serve as a template for the UAW's negotiations with the other two U.S. automakers, is the first since GM and Chrysler Group LLC received government bailouts to make it through bankruptcy protection in 2009.
GM pays around $56 per hour including wages and benefits, which is less than what Ford pays but far higher than other companies like Chrysler and Hyundai Motor Co.
Also, a former Saturn assembly plant in Tennessee will be reopened under the deal, the people said, and new products have been promised to plants in Michigan and Missouri. A plant in Wisconsin, which stopped producing trucks in 2009, will remain idled but won't close.
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