United Auto Workers members strike the General Motors Lansing Delta Assembly Plant on September 29, 2023 in Lansing, Michigan.
Bill Pugliano | Getty Images
General Motors expects new labor contracts with the United Auto Workers and Canadian union Unifor to increase its costs by $9.3 billion and add approximately $575 in costs per vehicle during the terms of the deals.
Most of those cost increases stem from GM’s deal with the UAW that’s set to expire in April 2028. The pact, which was ratified earlier this month, includes at least 25% hourly pay raises, the reinstatement of cost-of-living adjustments and enhanced profit-sharing payments, among other benefits.
The GM-UAW deal was reached after contentious talks between the sides that included personal attacks, political mudslinging and roughly six weeks of targeted labor strikes by the union.
Some of the increased cost could be passed on to consumers in the form of higher vehicle prices, however GM — as well as fellow Detroit automakers, Ford Motor and Stellantis, which also negotiated new labor agreements — has several other options such as operational cuts, headcount reductions and other means to help offset costs.
GM disclosed the expected labor deal impact as part of a business update Wednesday in which it initiated a $10 billion accelerated stock buyback, increased its dividend and reinstated its full-year 2023 guidance.
GM said Wednesday the UAW’s targeted strikes, which ended in late October, cost it $1.1 billion in adjusted earnings before interest and tax, or EBIT, in 2023. Additional wages, bonuses and other benefits for that labor contract and the Unifor agreement will cost another $200 million this year, the automaker said.
GM said the $9.3 billion in labor cost increases are expected to occur as follows: $1.5 billion in 2024; $1.8 billion in 2025; $2.1 billion in 2026; $2.5 billion in 2027; and $1.1 billion from January-April 2028.
The company is finalizing a budget for next year that will “fully offset the incremental costs of our new labor agreements,” GM CEO Mary Barra said Wednesday in a statement.
GM’s expected vehicle cost increase includes $500 per vehicle in 2024. Last month crosstown rival Ford estimated it would see additional costs of between $850 and $900 per vehicle assembled.
At the time, Ford CFO John Lawler said the company was working to “find productivity and efficiencies and cost reductions throughout the company” to offset the additional costs and deliver on previously announced profitability targets. That included canceling or postponing $12 billion in investments related to electric vehicles.
Ford is expected to update investors further on the cost impacts soon.
Chrysler-parent Stellantis, which was the second of the so-called “Big 3” U.S. automakers to reach a deal with the UAW, has not disclosed expected costs of its labor deal with the union.