Profit sharing to stoke GM, Ford, Fiat Chrysler talks – The Detroit News
Profit sharing and bonuses will take center stage in the upcoming UAW contract talks, especially at Fiat Chrysler Automobiles, where hourly workers pocketed less than half of what their counterparts at Ford and GM received in the current contract.
Over the four years of the current contract, which expires in September, most FCA workers received about $16,500 in bonuses and profit sharing before taxes. Over the same four years, Ford hourly employees received up to $43,200 in bonuses and profit sharing before taxes, and GM workers received $39,250 pre-tax.
Experts say negotiations with FCA could be contentious because of the profit sharing disparity; FCA’s second-tier workforce, whose employees rely more heavily on those payments; and work schedules that some FCA workers don’t like. More than 40 percent of FCA workers are on the lower-paid tier.
“It’ll make Chrysler more volatile negotiations,” said Art Schwartz, president of Labor and Economic Associates.
Labor experts believe automakers will favor keeping some form of profit sharing and bonuses in new four-year deals, instead of agreeing to raises for workers who have not gotten an hourly pay boost in a decade.
“It’s been part of the contracts since 1982, and it would take something big to get rid of it,” Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research in Ann Arbor, said of profit sharing. “But workers at FCA would like to see an adjustment to their formula, which differs from the other two companies both in structure and in payouts.”
Workers at Fiat Chrysler get $1 for every $1 million in profits, based on 85 percent of FCA US’s worldwide operating profit. That percentage represents FCA US’s North American pre-tax profits. Ford and GM employees are paid an average of $1 for every $1 million in pre-tax North American profits.
Automakers, who went through challenging and costly times in recent years, likely don’t want to add more fixed costs, like hourly raises, onto their books. If they do agree to pay raises, expect them to get something in return — such as requiring workers to contribute to their health care coverage.
Schwartz said while workers did not receive a raise during the 2011 contract, profit sharing and bonuses for Ford and GM were were higher than if they’d received a 3 percent pay increase each year.
■GM’s bonuses and profit sharing in the current contract included a $5,000 ratification bonus, four quality bonuses of $250 each ($1,000), three lump sum $1,000 performance bonuses ($3,000) and profit sharing of $30,250 ($7,000 in 2012, $6,750 in 2013, $7,500 in 2014 and $7,000 plus a $2,000 special performance payout in 2015).
“GM is committed to a compensation system that enables employees to win when the company wins,” GM spokeswoman Katie McBride said in a statement. “Variable pay such as profit-sharing is one way to do that.”
■Ford paid its hourly workers a $6,000 ratification bonus, $6,000 in inflation protection, a $1,000 performance bonus and $30,200 in profit sharing over four years — the largest in the company’s history over a single contract period, Ford said.
“We believe variable compensation such as profit sharing has been hugely successful in delivering value to our employees and allowing them to share in the success of the company,” the automaker said in a statement. “Moving forward, we will continue to recognize our employees’ contributions to our successful growth.”
■FCA paid a ratification bonus of $1,750 within 30 days of ratification, another ratification bonus of $1,750 in December 2012, four $500 performance bonuses ($2,000), four $500 quality bonuses ($2,000) and profit sharing of $9,000 ($1,500 in 2012, $2,250 in 2013, $2,500 in 2014, $2,750 in 2015). Some workers may have received higher quality and performance bonuses if they worked at a plant with World Class Manufacturing status.
Dziczek said FCA’s low numbers aren’t unique, when looked at from a historical perspective: “There’s been lopsidedness in profit-sharing disparity between the companies before. If you go back, there were many years where FCA was higher than GM or Ford.”
From 1993 through 1999, Chrysler employees received more in profit sharing than their crosstown counterparts — at times about $7,000 more per year than GM workers and $6,000 or more than Ford employees.
‘On the right path’
UAW vice president Norwood Jewell, who oversees the union’s Chrysler division, said while North American profits for Fiat Chrysler aren’t as high as GM’s and Ford’s, the company is moving in the right direction and “there are little tweaks” that the union could negotiate to help even the playing field for the workers.
“Theoretically, hopefully, we’re going on the right path to get to where the people at Chrysler would enjoy the same types of profit sharing checks that the people at Ford and GM do,” he said during a recent interview in Detroit. “It just wasn’t going to happen with the click of a finger. It’s something that’s going to take some time.”
Jewell would not elaborate on what those actions could be. When asked if different levels of profit sharing between the workers or larger fixed-level bonuses could be used, possibly in lieu of raises, he said the union has “not even begun to have discussions with the company on that.”
Schwartz said the formulas, which pay workers based on how profitable the companies are in North America, aren’t that different, but FCA made less money and profit sharing payments were smaller.
“It’s variable compensation,” he said. “It’s not guaranteed. You can do better in good times, but you can do worse in bad times.”
Dziczek said most workers realize that profit sharing can vary year to year, and most use the extra money to pay off credit cards and student loans instead of buying big-ticket items.
“If anyone expands their lifestyle to account for profit sharing, they’re going to have some bad years,” Dziczek said. “That’s not a way to build a household budget.”
‘A good supplement’
Bruce Baumhower, president of UAW Local 12 in Toledo, said FCA workers he represents want more than just the ever-fluctuating profit sharing checks.
“Profit sharing has been a good supplement to our members’ income, but we haven’t had raises in more than 10 years now,” he said. “I don’t think profit sharing alone should be the way they’re compensated.”
GM hourly workers such as Ramon Hernandez and Wade Peele, at GM’s Lansing Grand River Assembly Plant, say profit sharing helps them not only financially, but also with building a team environment.
“We are part of what this car’s end result is … so I’m a firm believer that the harder we work, the better we’ll all get,” said Peele, 44, of DeWitt. “And I think everyone should celebrate equally in the sharing of that. Success is only going to come with quality builds and quality launches of vehicles and being on time.”
“Everybody understands that … they’ve got to do their part to make good, quality cars,” added Hernandez, 41, of Okemos, a longtime GM worker.
Peele said he wants to see profit sharing continue in the coming contract with the UAW.
“It ties the people out on the floor to have some ownership of the vehicle and more face value of the vehicle. …,” Peele said. “It’s in everyone’s best benefit to have the highest quality jobs out here. Because quality is going to sell the vehicles.”