(GM) General Motors Strikes 4-Year Deal with UAW

General Motors Co. (GM) reached a tentative four-year agreement with the United Auto Workers (UAW) that covers 48,500 workers of the automaker. The company reached the agreement after nearly seven weeks of bargaining with UAW.

Under the new agreement, GM will hike the entry-level workers’ pay by $2 to $3 an hour. Starting pay will rise to about $16 an hour from $14 and increase to $19 an hour from $16 previously. According to UAW President Bob King the pay hike would help workers achieve a middle-class lifestyle.

In addition, GM agreed to pay a $5,000 signing bonus per worker under the new agreement, which was less than the $8,000 to $10,000 demanded by the union. The bonus payment would cost GM about $242.5 million.

GM intends to reopen its former Saturn assembly plant in Spring Hill, Tennessee as a part of the new agreement. The plant has been kept on standby since the automaker rolled out Chevrolet Traverse sport-utility vehicles in November 2009.

Terms of the four-year agreement are yet to be ratified. GM expects the union to hold ratification votes within the next seven to ten days.

GM is the first Detroit automaker to have reached a deal with the union. UAW will now proceed to bargain with Ford Motor Co. (F) and Chrysler.

The new agreements will determine wages and benefits for 113,000 union autoworkers, and set the wage standard at auto parts makers’ plants, plants run by foreign automakers in the U.S. and other manufacturers’ plants.

On the other hand, the U.S. automakers intend to reduce their labor costs, which would be competitive with Asian automakers such as Toyota Motor Corp. (TM) and Honda Motor Co. (HMC) at the same time.

GM, a Zacks #3 Rank (Hold) stock, posted a profit of $2.54 billion or $1.54 per share in the second quarter of the year, which almost doubled from $1.33 billion or 85 cents per share in the same quarter of 2010. The automaker has thus, beaten the Zacks Consensus Estimate by 33 cents.

Revenue in the quarter appreciated 19% to $39.37 billion (including $330 million from GM Financial) on worldwide sales of 2.32 million units versus 2.16 million a year ago, thereby capturing a market share of 12.2%. It also exceeded the Zacks Consensus Estimate of $36.61 billion.

Operating income rose to $2.45 billion from $1.90 billion a year ago. Earnings before interest and tax (EBIT) were $3.0 billion (adjusted) compared with $2.0 billion in the second quarter of 2010.

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