How General Motors Just Won a Big Labor Battle

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A long strike that derailed production of one of General Motors' (NYSE: GM) most popular new models has been resolved.

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Workers at a GM factory in Ontario that makes the popular Chevrolet Equinox crossover SUV returned to work on Monday night after ratifying a new four-year contract with GM. The roughly 2,800 workers had been on strike since Sept. 17

Although the workers voted to approve the new contract by a wide margin, they did so knowing that the union didn't get what it most wanted: A promise from GM to keep the factory busy long-term.

What's in the deal

Workers got 4% raises, some bonuses, an accelerated schedule of raises for new hires, and some strengthening of the contract's language around job security that will make it somewhat more costly for GM to close the factory.

But workers didn't get the key assurances they had demanded while on strike. 

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Why the workers went on strike

Workers had demanded that GM designate their factory, GM's CAMI Assembly Plant in Ingersoll, Ontario, as the "lead producer" of the Equinox. The Equinox is also produced at two GM plants in Mexico, but CAMI produces the majority of Equinoxes. Workers wanted GM to declare, in writing, that if it needed more Equinoxes, the CAMI factory would be first to get the additional work.

Workers also wanted GM to commit to building future products at CAMI after the current-generation Equinox is phased out, several years from now. 

After GM's negotiators balked at those demands, workers voted to strike.

Why the union came back to the negotiating table

Although GM and other automakers battled fiercely with labor unions in the past, in recent years it has been uncommon for an auto-factory strike to last more than a few days, at least in North America. On the rare occasions that workers choose to strike, the events usually follow this pattern: Workers walk out, a day or two passes, the automaker offers some concessions, a deal is made soon thereafter, and everyone declares victory.

That didn't happen this time. The workers at CAMI walked out, but days went by, and GM didn't budge, even as inventories of the hot-selling Equinox dropped sharply. That put the pressure back on the union: For workers, an extended strike is a financial hardship. After a few weeks, the surrounding community -- Ingersoll is a town of about 13,000 people -- was starting to feel the effects. 

GM ratcheted up the pressure further when it informed union leaders last week that it was starting to explore "other production alternatives." Translation: Get back to work soon, or we'll just close CAMI and crank up Equinox production at our factories in Mexico. 

That prompted Ontario government officials to step in and urge the parties to get back to negotiations, and the two sides reached a tentative agreement on Friday night. 

What's ahead for GM and the union

GM is clearly reserving the right to close CAMI at some point in the future. Given that the Trump administration looks to be preparing to exit the North American Free Trade Agreement, that's probably a prudent move.

I've long maintained that automakers are usually right to give reasonable concessions to workers; labor peace is a valuable thing. But GM clearly felt that this was a fight worth having, and it prevailed -- at least, for now.

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John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.