Workers at the New Flyer Industries manufacturing plant in St. Cloud, Minn., turned down a tentative agreement on a new four-year collective bargaining agreement on the weekend.
The company has about 550 employees there, 430 of whom are members of the Communication Workers of America Local 7304, representing about 20 per cent of New Flyer's total workforce.
Company officials and analysts expressed confidence on Monday the fact the new contract was not ratified right away will not derail a fairly positive situation for the bus makers that has endured a challenging market for a couple of years that is finally showing signs of life.
"We have been very pleased with the relationship that we've built with the CWA," said New Flyer CEO Paul Soubry. "The facilities are world-class and safety performance is industry-leading. Sure, we're disappointed in the membership's reaction to the negotiated CBA, but the current agreement will remain in effect during this period."
The group's collective bargaining agreement expired on March 31, and will continue in effect as is unless either the company or the union acts to terminate it.
In a report that came out after the voting took place on Sunday, Trevor Johnston, an analyst with National Bank Financial, said although it is a challenge for the company, it did not detract from what he believes is the most upbeat message he's heard from the company in the four-plus years he's been following New Flyer.
But still, Johnston wrote in a report released Sunday after the analyst met with management: "New Flyer's last strike in 2006 caused production to drop to 22 units per week, financial results to be meaningfully impaired and share price to gap lower, so investors should expect some near-term weakness until this plays out."
Late last month, Johnston increased his 52-week target price to $11.50 up from $11.00. That target price did not change after the news the tentative agreement had been voted down.
New Flyers shares closed down five cents on Monday to $9.95 on average trading volumes.
The St. Cloud plant, which opened in 1999, was designed to build complete buses in addition to doing final assembly operations with shells made in Winnipeg. New Flyer also operates another manufacturing plant in Crookston, Minn., in addition to its primary site in Winnipeg.
CWA spokeswoman Candice Johnson, said, "CWA members did vote to reject the tentative agreement by a solid vote. The bargaining committee and the membership now are discussing next steps and bargaining will resume later this month or early next."
New Flyer has targeted the St. Cloud plant as the site for production of the MiDi bus in a joint-venture agreement with Alexander Dennis Limited, the United Kingdom's largest bus manufacturer .
It's planning to build an addition to the St. Cloud plant to accommodate MiDi production that likely will also require additional workers.
"We have announced plans to expand a small section of the plant and currently intend for St. Cloud to be our first facility to build the MiDi buses, starting in December," Soubry said.
New Flyer made the deal with Alexander Dennis in May of 2012. In January, it forged a partnership with Brazilian bus maker Marcopolo, which acquired a 20 per cent equity stake in New Flyer for $116 million. It also took over some orphaned contracts from closed-down bus maker, Orion, and recently acquired its parts business.