Will General Motors' Workers Reject Their New Contract?

Workers at a General Motors factory in Arlington, Texas, voted to reject a new four-year labor agreement, according to reports. Margins at other facilities have been slim. Image source: General Motors.

Heads-up, General Motors investors: It's starting to look like the approval of GM's new four-year labor deal with the United Auto Workers (UAW) won't be a slam-dunk.

What's happening

General Motors workers represented by the UAW are in the midst of voting on a new four-year contract. The agreement was hammered out by the UAW and GM executives early last week . Voting began last Friday and is expected to continue for a few more days.

The votes are scheduled and conduced by the UAW's locals -- or put another way, the union's organization at each GM facility holds its own vote. But the votes are all rolled together, and if a simple majority of workers approve the contract, it goes into effect.

The agreement seems like a pretty good deal for workers. It's more lucrative for them than the contract approved by their counterparts at Fiat Chrysler Automobiles last month. (The UAW has yet to finalize a deal with Ford , and it probably won't until after GM's vote is concluded.)

But apparently, not all of GM's workers agree. The Detroit Free Pressreported on Wednesday that workers at GM's giant factory complex in Arlington, Texas, voted to reject the agreement. With over 4,000 members, the Arlington local carries a lot of weight. It was also rejected by more than 60% of workers at GM's Kansas City, Kansas, facility. Several other locals have voted in favor, but some of the margins are very slim.

(The Arlington facility makes the Chevrolet Tahoe and Suburban, GMC Yukon, and Cadillac Escalade. These are some of GM's hottest-selling and most profitable products. A work disruption at that plant would get very expensive for GM, very quickly.)

About one-third of eligible workers had voted as of the end of the day on Tuesday, with a slight majority in favor.

Why workers might reject the contract

There seem to be a few objections among those voting "no."

The raises provided for workers at four GM component plants are less lucrative than the rates given to workers at other facilities. Some workers (and not just the ones at those plants) think that's unfair and want all of the workers to get similar terms.

There are also specific provisions for "skilled tradespeople," who are a separate category of workers, that could increase their responsibilities and, in time, reduce their numbers. Skilled tradespeople are also ineligible for a $60,000 retirement incentive being offered to regular production workers if they elect tor retire early next year. Skilled tradespeople have voted to reject the contract by larger percentages than the regular production workers.

What happens if it's rejected?

In all likelihood, the UAW and GM would go back to the negotiating table to try to work out a deal that assuaged some of the workers' concerns. That's what happened after FCA's workers rejected their initial agreement . For the FCA workers, the upshot was a sweeter deal they were willing to approve, but it took a strike threat to get there.

The deal the UAW hammered out with GM includes most of what the FCA workers got in their second contract, along with some additional financial incentives. By that standard, it's a good deal for workers. But if enough of them decide it isn't good enough, they'll turn it down.

A big strike isn't likely -- yet

A protracted strike would be extremely costly for both sides. It's unlikely to happen. But if workers reject the deal, and if GM balks at making the changes workers want, the UAW could begin rattling its sabers.

GM and Ford investors should keep an eye on the voting as it progresses this week. For GM investors, there's no reason to worry quite yet. But if GM's workers reject this agreement, things could get complicated -- not just for GM, but for the ongoing negotiations with Ford as well.

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The article Will General Motors' Workers Reject Their New Contract? originally appeared on

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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