GM’s record North American profit could impact UAW talks

Staff/wire report

DETROIT

General Motors’ staggering $8.3 billion North American pretax profit through October all but guarantees larger profit-sharing checks for 52,700 United Auto Workers union employees, but it also might raise UAW expectations for a better contract than the deal negotiated with Fiat Chrysler, a GM official said.

“Our operating circumstances are different than Fiat Chrysler,” said Chuck Stevens, GM 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, including the Lordstown-built Chevrolet Cobalt, equipped with defective ignition switches.

Based on the same formula, which likely 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 likely will exceed that.

But some workers, especially the first-tier 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 voted through Wednesday night.

“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 a GM assembly plant in Flint, Mich. “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.

The third-quarter earnings are positive for local Lordstown General Motors Assembly Plant workers who built the best-selling Chevrolet Cruze.

“We always want our company to be profitable,” said Glenn Johnson, head of United Auto Workers Local 1112, who represents the assembly plant workers in Lordstown.

The more profitable the company is the more profit sharing employees can receive.

Johnson believes GM is getting its products right for customers by producing cutting-edge vehicles.

“They are continuing to push the envelope,” he said.

Robert Morales, head of the UAW Local 1714, who represents the fabrication plant workers in Lordstown, said GM workers are building trust in the customers.

“We want to make sure we put out the best quality [we have],” he said.

Positive earnings means “we are able to sustain as a company,” he said.

“The business is doing well, and we keep working,” Morales said. “It’s a win-win for everybody.”

On an earnings per-share basis, GM made $1.50, up 55 percent 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.

Those charges reflected a $575 million charge in the quarter as a result of agreeing to pay $900 million last month to settle criminal charges arising from its defective ignition switches, which have been tied to 124 deaths.

“These results reflect our work to capitalize on our strengths in the U.S. and China, while taking decisive, proactive steps to mitigate changes elsewhere,” CEO Mary Barra said in a statement.

GM shares rose $1.94, or 5.8 percent to close at $35.42 in trading Wednesday.

Contributor: Kalea Hall, staff reporter.