UAW, Stellantis reach tentative deal to end strike, Illinois plant may reopen, sources say

Oct 28 (Reuters) – The United Auto Workers reached a tentative labor deal with Chrysler-owner Stellantis (STLAM.MI) on Saturday, two sources said, moving closer to securing record wage hikes and a new life for a Jeep factory shut down earlier this year.

The tentative deal is a big step towards ending the first simultaneous strike against the Detroit Three automakers, and will follow a template set just days ago by UAW and Ford (F.N), including a 25% wage hike over the 4-1/2-year contract.

GM (GM.N) and UAW negotiators re-convened on Saturday after working into the early hours of the morning, two people familiar with the situation said. GM has agreed to the same range of hike and talks are focusing on other matters.

A public deal announcement with Stellantis is expected later Saturday afternoon or early evening, the sources said. Strikes have entered week seven.

Stellantis shuttered its assembly plant in Belvidere, Illinois, early this year, leaving 1,300 workers without jobs. The factory, which became a rallying cry for the union’s bargaining campaign, will reopen contingent on expected state and local tax incentives, the sources said.

UAW President Shawn Fain had vowed to reverse the closure. The Biden administration and the state of Illinois have offered subsidies that could help re-tool the factory. Illinois acquired 170 acres of land adjacent to the assembly plant.

The tentative contract deal will have provisions on the use of temporary workers, the sources said, adding Stellantis has agreed to significant investment.

Fain and other senior union leaders are briefing local UAW chiefs by video conference, the sources said.

The deal is also expected to include investments in other U.S. plants, including the Trenton engine plant, the sources said. The Trenton complex, located south of Detroit, built six cylinder engines. Some of the facilities date back to 1952.

Some 45,000 workers out of nearly 150,000 union members at the Detroit Three eventually joined the strike, which has cost billions of dollars to the industry.

INCREASED COSTS

Fain repeatedly accused the Detroit Three automakers of enriching executives and investors, while neglecting workers and said the UAW’s success would help blue collar workers throughout the country.

The Detroit automakers argued that the UAW’s demands would significantly raise costs and put them at a disadvantage compared with EV leader Tesla (TSLA.O) and foreign brands such as Toyota Motor (7203.T), which are nonunionized.

Ford expects the new contract will add $850 to $900 in labor cost per vehicle. Tesla already had a labor cost advantage of roughly $20 per hour before the UAW and the Detroit Three automakers began their bargaining, analysts have said.

The UAW has said the Ford deal would amount to total pay hikes of more than 33% when compounding and cost-of-living are factored in. The contract will start with an initial increase of 11%.

For the union and for the Detroit Three, the long-term success of the new contract will rest in part on whether the UAW can organize workers at Tesla and other non-union automakers, or push them to raise wages and narrow the cost advantage they take into competition with the Detroit brands.

EV TERMS

The strike which began at relatively unimportant plants spread to the biggest money-makers, producing pickup trucks and SUVs, ratcheting up the pain.

The UAW eventually struck against eight plants, most recently GM’s Arlington, Texas, assembly plant, which makes the Chevy Tahoe and Suburban, Ford’s Kentucky Truck heavy-duty pickup factory and Stellantis’ Ram pickup plant in Sterling Heights, Michigan.

The UAW’s initial demands had included 40% pay increases, cost-of-living adjustments pegged to inflation, job or pay guarantees, an end to lower wages for lower seniority workers and defined benefit pensions.

The UAW and the automakers were also bargaining over future wages and unionization policies for electric vehicle battery plants planned by joint ventures of the automakers and their South Korean battery partners.

Both GM and Ford recently said they would slow their EV buildouts as demand for these cars has slowed.

The UAW’s campaign for a record contract converged with union efforts in Hollywood and at delivery giant UPS (UPS.N) to win big pay increases. It also became the focus of attention by U.S. President Joe Biden and Republican rivals who see Michigan and other prominent auto-producing states as pivotal to their 2024 campaign strategies.

Our Standards: The Thomson Reuters Trust Principles.