The United Auto Workers (UAW) union and General Dynamics have reached a tentative agreement over a new labour contract covering hundreds of workers at some of the US defence contractor’s facilities, the company said on Monday (Oct 23), staving off a potential strike.

Shares of the company cut early losses to trade about flat in morning trading.

Earlier this month, over 1,000 UAW members in Michigan, Ohio and Pennsylvania plants had voted to authorise a strike after a four-year agreement was set to expire on Oct 22.

General Dynamics, one of the largest US defence contractors, manufactures weapons systems, munitions, combat vehicles such as Abrams tanks – which are being used by Ukraine to repel Russian forces – and submarines. Its biggest customer is the US government.

Like its peers, General Dynamics has struggled with supply and labour shortages at a time when weapons demand is on the rise due to the war in Ukraine, conflict in the Middle East and tensions in US-China relations over Taiwan.

UAW members at the company make military vehicles, including tanks and light armoured vehicles, according to the union.

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UAW did not immediately respond to a request for comment. Details of the proposed agreement, which needs to be ratified by UAW workers, were not immediately available.

The UAW is engaged in a separate strike action at the Detroit Three automakers – General Motors, Ford Motor and Stellantis – since the middle of last month in a fight for a better contract.

A tight US labour market, the expiry of multiple union contracts and high living costs have led to tough negotiations for pay hikes and benefits, triggering strikes and protests across industries.

General Dynamics has said it expects to negotiate the terms of 28 agreements with unions and works councils, covering about 12,600 employees this year. The company has a global workforce of 106,500 employees as of February. REUTERS