General Motors Co.'s shares rose Monday on news that the company's new contract with the United Auto Workers union will bring only a minimal increase in recurring costs for the automaker.
The tentative agreement, reached late Friday, includes a $5,000 signing bonus for workers and the possibility of sweeter profit-sharing checks for GM's 48,500 factory workers. But most aren't likely to see a pay raise.
Because fixed costs were contained, GM still will be able to break even in a depressed U.S. auto sales market of around 10.5 million, said a person familiar with the contract, who asked not to be identified.
GM shares rose 44 cents, or nearly 2 percent, to close at $23.05 Monday, about 30 percent below the initial public offering price of $33 per share in November. The shares topped $39 not long after the IPO but have traded as low as $20.88 more recently.
Union leaders from factories across the nation will be in Detroit today to hear UAW President Bob King and other leaders explain the contract terms. Workers must vote on the deal before it can take effect. Voting will take place in the next week or so.
Despite the GM pact's minimal increase in recurring costs, Chrysler Group CEO Sergio Marchionne said Monday that his company may not aim for a similar deal. The UAW is still negotiating with Chrysler and Ford Motor Co.
People briefed on GM's agreement said it includes a $2- to $3-per-hour pay raise for entry-level workers over the life of the contract and guarantees of more union jobs. GM now has around 2,400 workers making the entry-level wage of $14 to $16 per hour, about half the pay that longtime UAW workers get.