General Motors Co. (GM) announced that it would invest $100 million in its 72-year old Rochester plant in New York that was about to close. The company decided to continue with the plant as the workers agreed to “second-tier” wage levels.
The Rochester plant was opened in 1939 and later became a part of GM’s parts subsidiary, Delphi. However, the plant came under the purview of GM in 2009 after Delphi was spun off from it.
GM will manufacture a new fuel injection product line at the plant. The investment will secure the employment of 826 workers at the plant. It will also add 30 hourly jobs, bringing the total hourly wage workers to 675.
Most of the hourly workers would receive the “second-tier” or “entry level” pay of $14.50 per hour – about half of what a veteran autoworkers – following the agreement with United Auto Workers union that expires in September this year.
GM revealed that it will invest a total of $1.1 billion at 6 plants in North America in order to develop and produce the fuel-efficient “Gen V” engines. The engines will be used primarily in full-sized trucks of the 2013 model year.
Apart from GM, UAW entered into two-tier wage contract with Ford Motor Co. (F) and Chrysler. The wage contract helped U.S. automakers to compete with foreign automakers in terms of lower wages. However, the automakers will be in peril after the wage contract expires this year.However
A couple of weeks back, GM announced its plan to invest $30 million in its stamping plant in Pontiac, Michigan in order to upgrade tooling and equipment that will, in turn, enhance the plant’s manufacturing capabilities.
The upgrade will include three conventional press lines that are already operating at the plant and installation of two additional presses. With this, Pontiac stamping plant will work as a regional center supporting many other plants.
The latest investment brings GM’s total investment in the U.S. to more than $3.33 billion, creating or retaining more than 8,000 jobs in 22 plants, after emerging from bankruptcy in July last year.
GM, a Zacks #3 Rank (Hold) stock, posted a profit of 52 cents per share in the fourth quarter of 2010, exceeding the Zacks Consensus Estimate by 5 cents per share. The results excluded net charges of $0.4 billion due to the previously disclosed $0.7 billion loss on the purchase of U.S. Treasury preferred shares.
In absolute terms, the company turned a profit of $510 million during the quarter in sharp contrast to a loss of $3.52 billion in the comparable quarter of 2009 driven by the recovery in the North American and European automotive markets.
The automaker generated revenues of $36.9 billion during the quarter, which was higher than the Zacks Consensus Estimate of $34.9 billion. Unit sales escalated 11% to 2,173 vehicles from 1,952 vehicles in the fourth quarter of 2009. The automaker occupied a market share of 11.5% during the quarter, up from 11.4% in the year-ago quarter.
FORD MOTOR CO (F): Free Stock Analysis Report
Zacks Investment Research