General Motors' (NYSE:GM) new four-year labor contract has hit a snag. While it was approved by a majority of GM workers represented by the United Auto Workers union (UAW), a key subset voted it down.
That means the contract isn't officially approved yet. Now, the UAW has to figure out what to do next.
What happened: The UAW's new agreement with GM is considered "tentative" until it is approved by a majority of workers. But there's a catch: The UAW tallies the votes of regular production workers and specially designated skilled tradespeople separately. That's because the "skilled trades," as they're called in the industry, are a separate class of workers with somewhat different wage scales and working conditions.
The voting is complete, and 55.43% of the workers voted to accept the new agreement. Normally, that would be enough to make the contract a done deal. But while the regular production workers were solidly in favor of the new agreement, a majority (59.5%) of skilled trades voted against accepting the contract.
According to a Detroit Free Press report, GM's skilled trades object to language in the contract that will allow GM to reduce the number of skilled-trade classifications, and that allows GM to make them do jobs that go beyond their trained specialties. The tradespeople are also upset that they are ineligible for a $60,000 early retirement incentive that is being offered to senior production workers.
Perhaps in an attempt to pre-empt similar concerns, Ford's (NYSE:F) tentative agreement gives its skilled trades extra money and does not attempt to consolidate their job classifications, according to a Detroit News report. Ford workers are expected to begin voting on their new contract in the next few days.
What's happening now: UAW leaders are visiting GM plants to talk to the skilled tradespeople about their objections. Once that process is complete, the UAW's International Executive Board will meet to figure out what happens next.
Officially, the UAW has the power to declare that the contract has passed. But it also has the power to ask GM to go back to the negotiating table to make changes to the parts of the contract that are specific to the skilled trades.
Under the UAW's own rules, it can't make any changes to aspects of the agreement that are common to all of the workers at this point. That means its ability to horse-trade concessions with GM is limited: The UAW can't give up something that applies to all workers in order to win changes that benefit the skilled trades.
The upshot: From a GM shareholder's perspective, this probably won't be a big deal. Any added provisions for the skilled trades are unlikely to increase GM's costs significantly. And no matter what happens, a strike is unlikely given that a majority of workers has already voted to approve the new contract.
But that said, it's worth watching. For the most part, the UAW's current leadership has taken a more collaborative approach with the automakers than in the past. But the union has also shown that it still has some teeth, and it's willing to use them if negotiations reach an impasse. Keep an eye on this.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and 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.