GM Strikes Deal with CAW - Analyst Blog

By Zacks Equity Research,

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After Ford Motor Co. ( F ), Canadian Auto Workers (CAW) union has reached a tentative 4-year deal with another Detroit automaker General Motors Company ( GM ). Under the deal, GM would create or save 1,750 jobs and pump in C$675 million ($692 million) in its Canadian plants.

The agreement included 5,600 CAW workers represented by GM in Ontario. It would also require GM to extend the operation at its consolidated assembly line in Oshawa, Ontario, for a year. The plant was supposed to close in June next year.

Few days back, Ford reached a tentative 4-year deal with CAW union that would create 600 jobs and help the company save costs by paying lower hourly wages to new hires.

The workers-union has accepted a cut in starting wages ($24 per hour) that would take 10 years to reach $34 per hour instead of 6 years. The deal also included lump-sum payments of C$2,000 ($2,050) in lieu of raises and a C$3,000 ($3,076) ratification bonus. GM agreed to make the lump-sum payments same as Ford.

CAW-represented employees at both GM and Ford are yet to ratify the agreement. After GM and Ford, CAW will turn to Chrysler for a deal. Chrysler, controlled by Italy's Fiat SpA ( FIATY ), operates the largest facility in Canada among the Detroit Big Three.

GM, a Zacks #3 Rank (Hold) stock, reported a sharp 41% fall in profits to $1.49 billion or 90 cents per share in the second quarter of the year from $2.52 billion or $1.54 in the same quarter of 2011. Nevertheless, profits exceeded the Zacks Consensus Estimate by 15 cents per share.

Revenues in the quarter fell 4.5% to $37.61 billion, which is lower than the Zacks Consensus Estimate of $37.98 billion. Unit sales rose 3% to 2.39 million vehicles from 2.32 million vehicles in the second quarter of 2011. The automaker occupied a worldwide market share of 11.6% during the quarter, down from 12.3% a year-ago.

The decline in profits and revenues was attributable to strengthening of U.S. dollar against most of the major currencies as well as weak macroeconomic conditions globally, especially in Europe and South America.

FORD MOTOR CO (F): Free Stock Analysis Report
FIAT SPA (FIATY): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CAW , F , FIATY , GM

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