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Why investors like Detroit automaker-UAW profit-sharing checks

Phoebe Wall Howard, Detroit Free Press on

Published in Business News

DETROIT -- Factory workers at the Detroit Three auto plants pay close attention to annual earnings reports, perhaps as much as the big institutional investors and financial analysts.

Why? Because hourly employees whose contracts were negotiated by the UAW share the profits when companies do well and share the pain when profits dip.

Every spring since 2012, all three automakers have sent checks of varying amounts to their UAW workers. General Motors and Fiat Chrysler Automobiles will send this year's checks in February. Ford mails the checks in March.

This year, an estimated 50,000 GM workers will get $11,500 checks on average; 54,000 Ford workers will get $7,500 checks on average; and 40,000 FCA workers will get $5,500 checks on average.

These aren't bonus checks. They're part of a negotiated contract.

Cindy Estrada, a UAW vice president, said after the 2017 earnings report delivered by GM officials on Feb. 6: "Today's General Motors profit sharing, established under the 2015 contract negotiations, recognizes that UAW GM members' hard work is an essential part of General Motors sales and profits. UAW members at GM negotiated a well-deserved share in the profits of their hard work and sacrifice."

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Fact is, the Detroit-based automaker exceeded financial analysts' expectations when announcing $12.8 billion in pretax profits for 2017, despite reducing production through plant shutdowns. (The shutdowns are needed to prepare the factories to build new crossovers and trucks, including the 2019 Chevrolet Silverado. GM saw an overall net income loss, which was blamed on billions in special charges related to the new tax law and the sale of its European operations.)

"Profit sharing is meant to promote the relationship between the union and management to work together to meet deliverables," said Dave Sullivan, product analysis manager at AutoPacific Inc. "Previously, UAW members didn't have much of an incentive to meet production schedules and reduce waste and overtime."

Profit sharing also helps control costs during the bad years.

"Performance-based compensation is meant to unite everyone to have a hand in the health of the company every quarter," Sullivan said.

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