General Motors said Tuesday that its 50,000 union-represented U.S. employees will receive profit-sharing bonuses of $11,750 this year, a near-record payout for workers of the nation’s largest automaker.
The news from GM follows earlier profit-sharing announcements from cross-town rivals Ford and Fiat Chrysler Automobiles. Hourly employees at Ford are in line to get profit sharing checks of $7,500, while Fiat Chrysler employees will receive $5,500. All of those figures are pre-tax.
“These are big checks, and companies are doing quite well right now,” said Kristin Dziczek, the director of the Industry, Labor & Economics Group at the Center for Automotive Research in Ann Arbor.
Together, the three companies have about 10,500 employees in Monroe County in Michigan and Wood, Lucas, and Allen counties in Ohio who would be eligible for the bonuses. An estimate based on calculations by The Blade shows that could bring an extra $77.2 million into the local economy over the next six weeks or so.
While that’s inarguably a positive thing for those who are getting the checks, it’s difficult to gauge just how significant an economic impact that bonus money will have because we don’t know what the recipients will do with it.
“Do they put it on debt reduction and savings, or do they go out and buy stuff? This is certainly more than an average worker’s take-home pay in a week. It’s closer to a month of take-home pay,” Ms. Dziczek said. “They may spend some of it, and that spend is really good for the economy.”
Economists generally say that one-time bonuses such as profit sharing have less of an impact on the economy than do more permanent things such as wage increases. Even so, some of that money will start circulating.
Greg Oehlers, new car sales manager at Dave White Chevrolet in Sylvania, said it’s difficult to say how many new car purchases might be spurred by profit-sharing bonuses, though they do see some customers coming in at least in part because of their bonus checks.
“GM employees are loyal to their brand so they do tend to use that money to supplement purchase. Obviously keeping the economy going, buying cars, helps with their own job security,” Mr. Oehlers said. “If they put those bonuses on top of the tax returns that they get it’s a fairly large chunk of money that can help them buy cars.”
The Detroit Three have all offered their hourly workers the opportunity for profit sharing since the early 1980s, but the last few years have provided some of the highest payouts ever.
Ms. Dziczek has calculated the average payout across GM, Ford, and FCA over an eight-year period going back to 2011 has been more than $6,400.
That’s almost twice as much as workers received during the boom years of the 1990s and came after a decade in which profit-sharing bonuses were either low or non-existent.
Ms. Dziczek said some of that has to do with how the formulas that determine profit sharing were changed in the automaker’s 2011 contract with the United Auto Workers.
“The biggest change in the post-2011 period is the companies are profitable,” she said.
GM, for example, reported a pre-tax profit of $12.8 billion in 2017, on par with 2016. Fiat Chrysler’s profits, meanwhile, nearly doubled last year to $4.3 billion.
Employees at Fiat Chrysler also have a second bonus coming. In early January, the automaker announced it would be paying about 60,000 U.S. employees — including salaried employees — a one-time, $2,000 bonus tied to the corporate tax cuts that President Trump signed into law late last year. Fiat Chrysler’s chief executive officer has said the changes to U.S. tax code should save the company $1 billion a year.
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