General Motors
has a new labor deal with a key union. It just isn’t the deal, or the union, that investors are focused on.
Sunday, General Motors (ticker:
GM
) workers represented by Unifor, the union representing Canadian auto workers, ratified a new three-year labor deal. The deal looks solid for workers and shows, to some extent, what the company is willing to provide in a new deal. Candian workers are satisfied. It still isn’t clear what will make United Auto Workers leadership happy.
“I am proud of our members at General Motors for their solidarity throughout their brief but decisive strike action and for ratifying this contract that contains life-changing improvements,” said Unifor National President Lana Payne in an emailed statement.
Workers in Canada went on strike for about 12 hours. The company’s bending to some retirement demands appears to have been what broke the stalemate.
Wages will rise a total of about 16% over the life of the three-year contract with a 10% bump in the first year. Inflation protection is also included.
Retirement benefits are enhanced as well, with more contributions to defined benefit and defined contribution retirement plans. Workers also have less time to reach maximum wage rates.
Those wage rates will top out in year three at about $45 (Canadian dollars) an hour for production workers and $56 an hour for workers in trades. At 2,000 hours a year, that works out to gross wages of about $89,000 and $112,000 a year, respectively.
The average wage in Canada today is in the range of $40 an hour, or about $80,000 a year. The annual median household income in Canada, before taxes, is closer to $90,000, according to Statistics Canada.
Currency values and standards of living, of course, differ by country. The median household income in the U.S. is about $75,000.
The average hourly rate for a UAW worker in the U.S., according to Federal Reserve data, is about $33, or about $66,000 a year. There is a difference, but both numbers are about 90% of the medians. What’s more, the total compensation rate in the U.S. is $66 an hour. The higher number includes retirement and healthcare benefits.
Healthcare in Canada is a different negotiation. The bulk of Canadians’ healthcare coverage is through government-provided programs. A comparable all-in compensation cost per hour for a Canadian GM worker might be $50 to $55 an hour. That’s based on Barron’s estimates using details in the new labor deal. The union and GM didn’t immediately respond to a request for comment.
Total compensation for GM Canada looks to be about 120% of the median income in the country. For GM in the U.S., it looks to be about 175% of median income. Median incomes don’t include healthcare benefits. It’s just a point of reference for investors and, again, most of the healthcare spending is borne by the government in Canada, not employers.
Overall, the new Canadian deal includes wage increases, retirement enhancements, more paid time off, protection against inflation, faster progression to higher wage rates, and protection for workers in the EV transition.
GM has offered similar things in the U.S., but the UAW doesn’t seem to be budging off its position that more is needed. The UAW strike that began on Sept. 15 is now 30 days old. About 33,000 of 145,000 UAW employees are on strike at GM,
Ford Motor
(F), and
Stellantis
(STLA). Several thousand more have been laid off as a result of disruption to the production system.
Investors just don’t have a line of sight into how the U.S. strike will end. That is weighing on shares of Ford and GM. Through Friday trading, Ford and GM stocks were down about 21% and 27%, respectively, over the past three months, while the
S&P 500
was down about 4%.
Stellantis
shares are up about 4%, but the auto maker is a more global company and its shares are cheaper than the other two stocks. Stellantis stock trades for less than four times estimated 2024 earnings. Ford and GM shares trade for less than seven and five times, respectively.
Write to Al Root at allen.root@dowjones.com
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