UAW reaches tentative deal to end Stellantis strike, Illinois plant likely to reopen, sources say

Oct 28 (Reuters) – United Auto Workers reached a tentative labor agreement with Chrysler-owner Stellandis ( STLAM.MI ) on Saturday, the UAW said, moving closer to securing record pay raises and ending Detroit’s first simultaneous strike against three automakers.

The deal with Stellantis will follow the template set by the UAW and Ford ( FN ) days ago, including a 25% pay raise in a 4-1/2-year contract.

The deal includes an agreement to reopen Stellandis’ assembly plant in Belvidere, Illinois, where the company will now build midsize trucks, UAW President Shawn Fine said in a video posted on social media.

Fine also said he would expand the UAW strike at General Motors’ ( GM.N ) Spring Hill, Tennessee assembly plant. “We are disappointed by GM’s wanton and reckless refusal to come to a fair agreement,” he told Reuters in a statement.

Stellantis’ Belvidere factory closed earlier this year, leaving 1,300 workers out of work. Sources said the factory, which has become a rallying point for the union’s bargaining campaign, will reopen based on expected state and local tax incentives.

UAW President Shawn Fine vowed to reverse the shutdown. The Biden administration and the state of Illinois have offered grants that will help retool the factory. The Illinois legislature acquired 170 acres of land adjacent to the mill.

The temporary contract agreement will include provisions for the use of temporary workers, with Stellandis agreeing to a significant investment, the sources said.

The deal is 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.

About 45,000 of the nearly 150,000 union members at the Detroit Three eventually joined the strike — which has entered its seventh week — and has cost the industry billions of dollars.

Increased costs

Fine repeatedly accused the Detroit Three automakers of enriching executives and investors while ignoring workers and said a UAW victory would help blue-collar workers across the country.

The Detroit automakers argued that the UAW’s demands would significantly raise costs compared to foreign brands such as EV leader Tesla ( TSLA.O ) and Toyota Motor ( 7203.T ) and were non-union.

Ford expects the new contract to add $850 to $900 to labor costs per vehicle. Before UAW and the Detroit Three automakers began bargaining, Tesla had labor costs of about $20 an hour, analysts said.

The UAW said the Ford contract would represent a total wage increase of more than 33% when collective and cost-of-living factors are factored in. The contract will start with an initial increase of 11%.

For the union and the Detroit Three, the long-term success of the new deal depends on whether the UAW, Tesla and other non-union automakers can organize or push to raise wages and reduce the cost advantage they take. Competing with Detroit Brands.

EV regulations

The strike, which began in relatively unimportant plants that made pickup trucks and SUVs, spread to the big earners.

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

The UAW’s initial demands included 40% wage increases, cost-of-living adjustments tied to inflation, job or wage guarantees, lower wages for less senior workers and limited benefit pensions.

The UAW and automakers were also negotiating future wages and union policies for electric vehicle battery plants planned by the automakers and their South Korean battery partners.

Both GM and Ford have recently said they are slowing their EV buildouts as demand for these cars declines.

The UAW’s campaign for a record deal coincided with union efforts to win big pay raises at Hollywood and delivery giant UPS ( UPS.N ). That has caught the attention of US President Joe Biden and Republican rivals, who are eyeing Michigan and other major auto manufacturing states as key to their 2024 campaign strategies.

Our Standards: Thomson Reuters Trust Principles.