GM wants to tie union pay to performance

By Dow Jones Newswires-Wall Street Journal
Posted Jan. 12 at 7:34 a.m.

General Motors Co. wants pay for union-represented workers be tied to employees’ work performance and the company’s financial health — much like the way its salaried workers are paid — in what would be a major shift in how generations of auto workers have been compensated.

“They are trying to give hourly workers the same metrics as salaried workers,” GM Vice Chairman Stephen Girsky said Tuesday at the Detroit auto show. “There is a big pay-for-performance element going through the company and there is going to be more of it.”

GM wants more flexible pay levels for workers as a way to encourage better performance and avoid locking the company into handing out big raises when the company isn’t performing well, company executives say.

In addition to performance-based pay, the union and U.S. auto makers are exploring the idea of a profit- sharing formula as a way for workers to cash in on the industry’s improving fortunes.

The issue would likely be negotiated as part of contract talks this year between Detroit auto makers and the United Auto Workers union. The UAW couldn’t immediately be reached for comment.

Girsky, a former UAW consultant who represents a trust for retired union workers on GM’s board, said UAW President Bob King is “open to exploring options.”

Hourly auto workers have long operated under a system in which pay increases at a set amount based on seniority and job descriptions. The UAW in 2007 agreed to a two-tier wage system that cuts pay in half for some employees, mostly new workers.

For GM, the agreement cut the combined wage-and-benefit cost for a newly hired factory worker to $25.65 an hour, compared with about $60 an hour for current workers. Now the company would like another big change.

GM CEO Daniel Akerson said Tuesday in a speech that he favors an “incentive-enhanced, variable pay system” for employees. “This would be a very large shift and the issue isn’t simply one of principal but one of what the terms will look like,” said Harley Shaiken, a professor at the University of California, Berkeley, who specializes in labor issues.

GM executives, in discussing the shift, have noted the bulk of their pay is tied to performance.

“But it is not quite that easy,” Shaiken said. “There are profoundly different issues involved.”

Separately, an Obama administration official said Tuesday that the recent surge in GM’s stock price bodes well for the company’s goal to cut ties with the U.S. government.

Ron Bloom, the U.S. Treasury’s point person on GM, said the administration is pleased with the auto maker’s share performance and “serious” about selling the remainder of its stake in the company.

GM and its stock underwriters are increasingly optimistic that the Treasury will sell most or all of its remaining stake next year, rather than offloading shares gradually over the next few years. The U.S. Treasury reduced its GM stake to 26.5% from 61% in November’s $23.1 billion GM initial public stock offering.

“At some point we are going to sell the remainder of our shares, so 1 8 the stock price increase 3 8 is a good thing,” Mr. Bloom said in an interview. “The size of the initial IPO ought to give people some indication that we are serious about exiting as soon as practicable.”

Before the IPO, Mr. Akerson said he had expected the Treasury could take several years to sell its stake.

Banks underwriting the stock sale and GM executives would prefer to see the government cut ties with GM more quickly, said people familiar with the matter.

Government ownership of GM remains offputting to potential consumers and investors, though to a far lesser extent than when Treasury was majority owner, GM’s Mr. Girsky said.

“It will be a great day when we get the government gone entirely,” he said.

Bloom said the Treasury will balance its desire to exit from GM with an obligation to recoup as much as possible of the government’s $50 billion bailout of GM. He said too much uncertainty remains around GM’s performance and the health of the overall auto market to know whether the Treasury could meet its objectives with major stock sale in 2011.

“If the stock price goes down, we would then be reporting a larger loss [ on the government stake ] and that would be an issue which we would have to take into account,” Bloom said. “Investing in private companies is best done by private investors and getting out has a broad benefit for the financial markets. We are of course also mindful of our commitment to taxpayers.”

The Treasury needs to sell its remaining GM shares at an average price of $53 each to break even on the bailout. GM shares closed at $38.70, down five cents, Tuesday, compared with the $33 IPO price.

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  1. Adam Jan. 12 at 9:01 a.m.

    Jeez, there’s a novel idea.

  2. Mary Jan. 12 at 9:31 a.m.

    When are these people going to realize that they would sell more cars if they weren’t passing their labor costs along to the consumer …we can’t afford to pay for their ridiculous salaries!

  3. an ex-banker Jan. 12 at 10:58 a.m.

    seriously? $60 an hour for someone to stand on an assembly line and hold a drill? No wonder why the other auto makers are opening plants in non-union states. it makes me wonder why i went to grad school!! I could have saved myself all that money and just applied at GM. that’s a scam, and just another reason why i’ll never buy a GM auto. i’m not funding that nonsense!

  4. cn Jan. 12 at 2:26 pm

    When will people figure out that yes, UAW workers make an excellent salary. Workers at non-union plants don’t do too bad themselves. The price between a UAW made automobile and a non-union made automobile isn’t much different. A Nissan, Toyota, Honda are no cheaper than a Chevy, Buick, Dodge, Ford, etc., etc. Since non-union employees are paid so much less, where do you think that money is going to?

  5. The dude Jan. 12 at 4:50 pm

    Bottom line, unions help people that are in unions. Everyone else gets screwed.

  6. james Jan. 14 at 2:00 a.m.

    They do not make $60/hr not even close,but they do make alot. Then again when the median price of a home is way over 100k,what do you expect. 3veryones salaries have went down,but prices on everything has went up. one day things will correct themselves,and this past recession will look like a picnic.