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GM and UAW reach deal that could end strike

Tentative pact provides for signing bonus, wage increases and lump-sum payments

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UAW members and supporters picketing outside the General Motors Flint Metal Center in Flint, Michigan.

GENERAL Motors and the autoworkers' union, confronting a period of flagging sales after years of record profits, reached a tentative contract deal on Wednesday that could end the company's longest strike in half a century.

The four-year agreement provides for a signing bonus of more than US$8,000, as well as wage increases of 3 per cent in some years and lump-sum payments of 4 per cent in others, according to people familiar with the terms. They said it also included a path to permanent employment for temporary workers.

The United Automobile Workers (UAW), in announcing the agreement, said it had "achieved major wins". It plans to lay out the terms to representatives of its GM locals at a meeting in Detroit on Thursday morning, a chance for the leadership to frame the victories it feels it won.

GM confirmed the accord in a terse statement. But it was not clear how some of the most contentious matters - like narrowing pay gaps between long-term employees and more recent hires, and GM commitments to domestic production - had been resolved.

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The stakes were high for both sides. GM must plan around a sales slowdown in the US and China and the need for big investments in electric vehicles and self-driving cars. And the carworkers were intent on getting a bigger share of the gains the company has made since its bankruptcy a decade ago.

The walkout has left a mounting economic toll since it began on Sept 16. It has cost the union, its members and GM hundreds of millions of dollars in lost dues, wages and revenue, and has idled truckers and suppliers that serve the carmaker.

The local leaders could decide on Thursday to end the strike immediately or to wait until the contract is ratified by GM's 49,000 union members. The UAW will then turn its attention to Ford Motor Co or Fiat Chrysler, seeking similar terms.

Wiley Turnage, president of Local 22, which represents 700 workers at GM's Detroit-Hamtramck plant, said he hoped that his members could get back to the assembly line quickly. But he said he needed to review the details of the tentative agreement before deciding whether to vote in favour of it on Thursday.

The UAW chose GM as its initial contract target because the company has closed plants in the US this year and over the last several years has substantially increased production at its four plants in Mexico. The union pointed to GM's record profits in North America and more than US$10 billion in stock buybacks since 2015.

With negotiations at an impasse last month, the union declared the first nationwide strike against a Detroit carmaker since 2007. One of the union's aims was to reduce pay disparities between those hired before and after 2007, when a two-tier pay scale was negotiated to help ease GM's financial distress. The union also wanted GM to make firm commitments to producing future vehicles in the US but said the company had resisted doing so.

GM entered the talks hoping to reduce its healthcare costs and limit increases in wages and benefits. Last week the company said it had offered to invest US$7.7 billion in its domestic plants from its own coffers and US$1.3 billion through ventures with other companies, including a battery plant that would hire union workers under a separate contract. It proposed to locate that plant near Lordstown, Ohio, where a GM factory assembling the Chevrolet Cruze ceased production this year.

The tentative agreement, if it becomes final, would solve the most immediate challenge facing CEO Mary Barra and should provide certainty in calculating labour costs over the next four years. "It's critically important to have certainty about the costs the manufacturers have to plan for," said Mark Wakefield, a managing director at AlixPartners, a consulting firm with a large automotive practice. "It's important to get a deal that's fair and equitable but also one that doesn't put you at a competitive imbalance."

In the last five years, as American consumers flocked to high-margin trucks and SUVs, both GM and its unionised workforce have prospered. In the last three years, GM has made US$35 billion in profit in North America, and workers have been given profit-sharing cheques averaging US$11,000 a year.

But even though GM was scaled down in bankruptcy, it still has excess production capacity. The company has enough plants to make about one million more vehicles than it is selling, according to the Center for Automotive Research, an independent, nonprofit group.

At the same time, GM is spending heavily to develop electric vehicles and self-driving technology, and its business outlook is uncertain.

That is one reason that GM has been eager to retain flexibility in the size and deployment of its workforce. Among the issues in dispute was the extent of GM's use of temporary workers - now 7 per cent of its head count - and their path to full-time status. Most temporary workers earn US$15 an hour, compared with roughly US$31 an hour for workers hired before 2007. Most permanent workers hired after 2007, known as "in progression" workers, earn about US$17 to US$25 an hour. Veteran workers are guaranteed pensions in retirement. In-progression and temporary workers have 401(k) accounts to which they contribute. NYTIMES