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Auto Industry Back in The Driver's Seat As Employees Get Ready to Receive Dividends

Source: NY Times

Posted on 13 Jan 2011

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The American auto industry is about to pay off handsomely for the blue-collar workers at Ford and General Motors. The two big Detroit carmakers will announce profit-sharing checks this month for their hourly workers, perhaps the largest in a decade, company officials and industry analysts say.

While the payouts — expected to top $5,000 at Ford — underscore the turnaround being celebrated at the Detroit auto show this week, they also foreshadow the enormous challenge awaiting the rebounding companies: how to maintain and build on their financial health while keeping their historically restive work force in line.

All three Detroit car companies are preparing to negotiate new contracts with the United Automobile Workers union this summer. Hovering over the talks will be both the dark days leading up to the federal bailouts of G.M. and Chrysler in 2009, and the renewed sense of optimism permeating the domestic industry.

With sales rising and promising new vehicles on the way, the automakers are solidly positioned for future profits. But in the past, Detroit has tended to reward workers in good times, only to demand givebacks when fortunes changed.

Labor talks in Detroit are a ritual in which both sides talk tough and ultimately square off on the hard issues of wages and benefits. But there are some early indications that this year might be different, and that practical considerations about the industry’s overall competitiveness could replace the combative tone of previous negotiations.

The gap in labor costs between Detroit and the foreign-owned factories in the United States has narrowed considerably. Ford’s total labor cost for a worker — a combination of wages, benefits and pensions — has been reduced more than 20 percent and is now about $59 an hour, compared to $56 at Toyota, according to the Center for Automotive Research in Ann Arbor, Mich.

And some new ideas about compensation are surfacing. On Tuesday G.M.’s chief executive, Daniel F. Akerson, suggested that bonuses for hourly workers should be tied to vehicle quality and overall company performance.

The union’s president, Bob King, responded that workers would have an open mind as long as they got a piece of the profits in the new contracts. The current four-year contracts expire in the fall.

“What’s going to be important is that members feel they are being respected and that they are getting their fair share of the upside,” Mr. King said Wednesday. The traditional profit-sharing plan for the union has put little money in workers’ pockets in recent years. Ford was the only profitable Detroit carmaker in 2009, and its workers got $450 each as their share of the company’s earnings.

But both G.M. and Ford enjoyed strong years in 2010 and are expected to report big profits this month. Industry analysts estimate that Ford’s 42,000 union workers will get profit-sharing checks of at least $5,000, based on the company’s performance last year in the North American market. That would be the biggest payout since the $8,000 checks that Ford handed out in 2000.

Workers at G.M. are likely to get less than their peers at Ford because the company didn’t do quite as well. Also, G.M. has a bigger pool of union workers — 54,000 — to compensate. But to rank-and-file employees who lived through the company’s financial collapse and subsequent government rescue, the checks will be tangible evidence that G.M. is well back on its feet.

“That would be a great bonus, especially with the overtime pay that we’ve lost and the years that our wages were frozen,” said Bill Parker, a G.M. worker at the plant here that builds the Chevrolet Volt.

But in the next breath, Mr. Parker said that regardless of the size of the bonus checks, he felt fortunate to still have a job after G.M. cut more than 40,000 union positions in the last five years. “I’m happy to be here in this building,” he said.