A four-year deal was struck on Saturday between General Motors Company (NYSE:GM) and Unifor, the union in charge of representing the firm’s workers in Canada. The accord will be particularly important for the employees whose contracts were set to expire on September 16. Had an agreement not been reached, around a third of the 9,000 workers the company employs at its assembly plant in Ingersoll, Ontario, would have been on the street. Solving this problem was paramount, as General Motors Company (NYSE:GM) has had difficulties resolving labor issues in Canada, resulting in an increasingly vocal unionized workforce.
In an emailed statement, the union announced the deal included a C$3,000 ($2,910) signing bonus and annual lump sum payments of C$2,000 for 2014, 2015 and 2016. Additionally, current pension benefits will be maintained for active workers and retirees, and according to Unifor, hundreds of temporary workers will be given full-time jobs.
The Canadian government was caught in the middle of this dispute since it holds $1.1 billion worth of General Motors Company (NYSE:GM) stock, and has plans for selling its entire stake in the firm. Jerry Dias, chief of Unifor, wrote letters to several local finance ministers urging them not to follow through with the sale. According to Dias, selling off shares means the government would lose all leveraging power and be unable to protect Canadian workers. Nevertheless, it is unclear whether General Motors Company (NYSE:GM) would actually increase its leveraging power over workers, should the government sell its stocks.
The union leader indicated that the firm has a tendency to deal with labor issues by threatening to phase out production, in case that these aren’t resolved favourably. Considering developments over the past year, however, it is quite far-fetched to think General Motors Company (NYSE:GM) would move production away from Canada. The company has been investing heavily in the Ontario plant where the Chevy Equinox is produced. The instalment of body shop equipment and tools was intended to allow the factory to manufacture more types of vehicles. The agreement reached with Unifor, along with the investments made earlier this year are not indicative of a company planning to phase out production any time soon.
Disclosure: Pablo Erbar holds no position in any stocks mentioned