General Motors’ new pact with the UAW will be made public on Tuesday yet but it has been discovered that the automaker was able to keep labor costs down. Two sources said that while the union wanted a bonus of $8,000 to $10,000 for each person who agreed to the four-year contract, GM was able to bring it down to $5,000.
The sources also divulged that GM will raise entry-level pay by $2 to $3 an hour. The union said that the contract ties more pay to GM's earnings and results to some wages being variable. An analyst for Barclays Capital, Brian Johnson, has an "overweight" rating on GM stock.
He said that it doesn’t appear as if GM “held the line" on labor costs, according to BusinessWeek. Barclays and the Center for Automotive Research in Ann Arbor, Mich., estimated that GM’s payments to its union workers are 47% higher than the payments of Volkswagen AG and Hyundai Motor Co. GM has posted profits for six straight quarters and in the first half of 2011, it took back the title of world's biggest automaker.
Johnson said that it’s likely that the gap won’t close much under the new deal. On the New York Stock Exchange last Friday, GM fell 9 cents to $22.61. This is 31% lower than the $33 price of its November initial public offering. CEO Dan Akerson has failed to turn around the dropping stock price as analysts lowered expectations for U.S. auto sales with the waning of consumers' confidence.