Eyeing big GM profits, UAW may want more in contract – USA TODAY
DETROIT — General Motors’ (GM) staggering $8.3 billion North American pretax profit through October all but guarantees larger profit sharing checks for 52,700 UAW workers, but it might also raise UAW expectations for a better contract than the deal negotiated with Fiat Chrysler Automobiles.
“Our operating circumstances are different than Fiat Chrysler,” said Chuck Stevens, GM’s chief financial officer. “We have demonstrated the ability to work with the UAW in a constructive way to come up with a contract that meets the needs of the business.”
One of those constructive ways was GM’s decision to pay $9,000 in profit sharing last spring to its full-time UAW workers, or about $2,400 more than they were entitled to under the 2011 contract, based on pretax profit in North America. That profit — about $6.6 billion — was reduced by expenses of a record number of recalls, particularly the recall of about 2.5 million small cars equipped with defective ignition switches.
Based on the same formula, which probably will be part of the upcoming contract talks, the profit-sharing payment would be based on the $8.3 billion number, plus whatever North American profit GM makes in the fourth quarter. In short, that fourth-quarter profit would need to be $700 million to generate the same payment as last year. If recent quarters are an indication, the company probably will exceed that.
But some workers, especially the Tier 1 workers whose base wages haven’t gone up in 10 years, want that base wage to increase. It increases slightly — about $1.60 an hour over four years — under the Fiat Chrysler agreement on which its members approved.
“The company’s profit might raise expectations a little bit, but people mainly want to know that the pension fund remains intact and the health care stays the same,” said Tim Shoup, a UAW member at GM’s Flint Truck assembly plant. “As long as they give the same type of signing bonus they gave last time ($5,000), I think we can ratify an agreement.”
While GM’s worldwide third-quarter earnings of $1.4 billion were down slightly from a year earlier, they exceeded Wall Street expectations as profits in North America more than offset slower growth in China and losses in Europe and South America.
On an earnings per share basis, GM made $1.50, up 55% from a year earlier and easily beating the $1.19 per share consensus estimate among 16 analysts. But that number was 84 cents after subtracting 66 cents for special accounting charges.
Despite Wall Street’s and auto executives’ fascination in recent years with Russia, China, Brazil and India, the industry’s primary engine grinds away in North America. GM draws more than 70% of its revenue from the region.
While Americans are paying more than $32,000 for the average new vehicle, GM’s pricing in North America softened a little in the third quarter. The auction sale of used cars returned from rental fleets cost GM $100 million. The company also discounted prices on certain 2015 models to clear the way for new products.
Earlier this year, GM agreed to buy back $5 billion of its shares in response to a group of large investors who urged it to buy back $8 billion.
Stevens said the company has returned $4.6 billion to shareholders so far this year through that share buyback and dividends.
GM shares were up 4 cents, or 0.11%, to $35.46 in mid-day trading.