General Motors (GM
) and the Canadian auto workers union reached a tentative deal late Monday that narrowly averted a strike planned for midnight at the carmaker’s plants in that nation.
Under the terms of the deal, which must still be approved by rank-and-file union members in a vote Sunday, GM agreed
to move engine production from a plant in Mexico to one in Ontario. In return, the union agreed to concessions on their pension plan.
The union, called Unifor, agreed to a pure defined-contribution retirement plan for new workers -- cutting GM’s pension expense. The move is the first such pension concession from Unifor under the so-called Master Agreement, which covers GM, Ford and Fiat Chrysler. Earlier hires had either a traditional pension or a hybrid of defined contribution and pension plans.
Under the agreement, GM will invest some US$300 million to upgrade its so-called “flex” assembly line in Ontario, according to Bloomberg News
. That investment makes the Ontario plant the only facility in North America to build both trucks and cars. At present, three car models are made on the flex line. Production of a fourth, unspecified vehicle, will move to the line as part of the agreement, according to the Globe and Mail
The deal sets high expectations for negotiations between Unifor and Ford and Fiat Chrysler. By tradition, contract talks are held between the union and one manufacturer at a time. Unifor president Jerry Dias said
he expected to decide within 24 hours which company it would open negotiations with next.
The four-year agreement between Unifor and GM covers some 4,000 workers.
Analysts had no immediate reaction to the news. Nomura began coverage
of GM today with a “neutral” rating and a target of $33. Nomura singled out GM’s “very profitable” pickup truck business in a statement, but did not mention the labor deal in Canada. On Monday, analysts at Morgan Stanley upgraded
GM from "equal weight" to "overweight” and raised the target price from $29 to $37.
GM has positive ratings from 45 percent of analysts over the past 30 days, with a median target of $36.5.