General Motors of Canada Co. has pledged to eliminate the $2.6-billion deficit in the pension plans for its unionized workers and retirees as part of a new contract negotiated between the company and Unifor.
The auto maker's 29,000 retirees in Canada were worried about the future of the plans as Unifor and GM went into contract negotiations earlier this month, fearing that the assembly plant in Oshawa, Ont., would be closed, the company would wind up the plans and they would take a hit of about 25 per cent on their pensions.
But the union won commitments on production for the Oshawa plant that will keep it operating past 2019, including the extension of the current Chevrolet Impala and Cadillac XTS cars built there. Oshawa workers will also perform final installation of interiors and other components on Chevrolet Silverado pickup truck bodies shipped to the plant from a GM factory in Fort Wayne, Ind.
Those measures will save about 2,500 jobs in Oshawa. Workers at three General Motors plants in Ontario approved the new agreement in voting on Sunday.
The new contract was approved by 64.7 per cent of workers who voted.
The Oshawa plant was on the endangered list because one assembly line is scheduled to be closed next year and no new products were allocated to the adjacent flexible assembly line to replace vehicles that are scheduled to go out of production later this decade.
Salaried GM Canada retirees shared similar concerns about the future of their pension fund, which amounted to about $400-million as of May's actuarial valuation.
GM Canada used about $4.5-billion of a $10.8-billion bailout provided by federal and Ontario taxpayers to reduce a massive pension deficit after its parent company went into Chapter 11 bankruptcy protection in the United States in 2009.
But the deficit jumped again amid poor stock returns and nearly a decade of rock-bottom low interest rates.
The deficit in the unionized plans fell last year from $3.1-billion, but if they were to be wound up, workers would have received only about 78 per cent of what they were due.
Unionized retirees and most current workers at GM Canada participate in a defined benefits pension plan that pays them a set amount every month.
The union agreed in negotiations four years ago to a pension scheme for newly hired employees that combined defined benefits and defined contributions by the company and employees.
The new agreement calls for a defined contribution pension plan only for newly hired employees with mandatory contributions of 4 per cent of earnings by the plan member and the company.
Senior human resources officials with General Motors Co. had been pushing Unifor for more than a year to agree to a switch to a defined contribution plan, sources have said.
Current GM Canada workers will receive bonus payments of $12,000 during the next four years and 2-per-cent wage increases this year and in 2019.
The contract calls for a ratification bonus of $6,000 and lump-sump payments of $2,000 in each of years two, three and four, according to highlights of the agreement released Sunday at a ratification meeting in Oshawa.
Wages will rise to $35.78 an hour by the end of the four-year agreement from the current level of $34.41, the first increase in hourly wages in nine years.
Workers who retired before 1987 or their surviving spouses, will receive a $1,500 lump-sum payment. That's the first payment for any retirees in several sets of contract negotiations.
But the key issue for Unifor in talks with GM that led to a deal minutes before a strike deadline last Monday was winning investment to save the assembly plant in Oshawa and secure the future of an engine and transmission factory in St. Catharines.
The union has announced it will negotiate next with Fiat Chrysler Automobiles NV and has set of a strike deadline of Oct. 10.