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General Dynamics Shipyard Makes Peace With Striking Workers

By Lou Whiteman - Updated Aug 24, 2020 at 10:26AM

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The company's Bath, Maine, facility has been an underperformer in recent years.

Workers at Bath Iron Works approved a new three-year contract over the weekend, ending a 63-day strike that disrupted operations at the General Dynamics-owned (GD -1.30%) shipyard.

More than 4,000 workers walked off the job at Bath Iron Works in June, seeking to resist changes in work rules, seniority, and subcontracting. The strike was the culmination of years of simmering tensions at the Maine facility, dating back to concessions that members of the Machinists Union Local S6 had accepted in previous negotiations designed to help the shipyard lure new business.

A crowd is gathered on the dock beside a new destroyer.

A Zumwalt-class destroyer is commissioned at a ceremony in Bath, Maine. Image source: General Dynamics.

The two sides reached a tentative agreement earlier this month, and on Aug. 23 the union announced that 87% of voters had approved the deal.

The agreement was reached with the help of government mediators. Terms call for workers to get a 3% annual pay raise and for restrictions on hiring subcontractors to remain in place, though Bath Iron Works did win streamlined rules for hiring subcontractors. The company's original proposal had included the pay raise, but had hoped to trade it for provisions that would allow more liberal use of subcontractors and work-rule changes that the union said were a challenge to seniority.

The deal comes at a difficult time for Bath Iron Works, which was already behind schedule even before the COVID-19 pandemic and strike. Shipbuilding is a big part of the General Dynamics portfolio, but the most important pieces of that operation, the company's nuclear submarines, are built down the coast in Groton, Conn.

Bath makes destroyers and other midsize ships, but the yard has struggled to win new business in recent years. The defense contractor was hoping to bring down overall costs at Bath to make it more cost-competitive after losing a Coast Guard ship competition in 2016 and a frigate deal last year.

Bath Iron Works said, "We are pleased to welcome back our valued manufacturing employees and get back to the important work of building ships on schedule for the U.S. Navy."

Lou Whiteman owns shares of General Dynamics. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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