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New UAW Agreement Will Allow GM To Realize a Profit From Production Of The New Aveo

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On: Tue, Oct 5, 2010 at 12:54PM | By: Sherry Christiansen

New UAW Agreement Will Allow GM To Realize a Profit From Production Of The New Aveo

According to Automotive News.com, the United Auto Workers union has negotiated a contract with General Motors to begin production on the first profitable compact car produced by the company in the United States.

The subcompact Aveo was originally built and designed in Korea before being shipped to the US, but now GM has signed a contract with the UAW to build the next generation Aveo in Michigan’s Orion Township plant. General Motors will receive nearly $800 million in local tax credits that will enable the company to pay the full union wages of $28 per hour to auto workers who will build the Aveo in Detroit. 

GM will also score points with consumers for saving hundreds of union jobs as the contract stipulates 60% of all workers at the Orion Township assembly plant will assemble the Chevrolet Aveo in exchange for $28 per hour plus full benefits, according to Miek Dunn, shop chairman at UAW Local 5960. The other 40% will receive “a so-called Tier 2 wage equal to roughly half that of so-called legacy workers,” says Automotive News.com.

900 of the 1,500 workers that had been laid off from the plant have been offered to return to assemble the Aveo at full salary and benefits. The remaining workers can decide to either return at reduced wages and full benefits, or pursue a transfer to another General Motors plant.

Small compact cars that have a lower sticker price than other models are traditionally assembled overseas, where labor costs are less than in the U.S., then shipped to the United States to be sold domestically.

The Orion plant will be retooled to build the Aveo as the plant previously built mid-sized sedans. The reduced salary wage agreement signed by GM and the UAW will allow the company to build the subcompact cars in the United States and make a profit.

The agreement was signed last week and, according to Automotive News, GM spokesperson Kimberly Carpenter stated that the agreement has been signed but he refused to give any details. Carpenter stated: "GM has worked closely with the UAW to create new and innovative contractual language that will allow this facility to be flexible and lean—essential elements in this highly competitive small-car market segment."

Aveo production is scheduled to begin in 2011 for the 2012 model, according to Carpenter.

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