DETROIT -- General Motors and Ford Motor Co. will give signing bonuses totaling nearly $1 billion to hourly workers who narrowly ratified new labor contracts this month, or about $160 for every vehicle the companies are on pace to sell this year in the U.S.
But the bonuses, pay increases and benefit improvements workers at GM and Ford are getting, partially reversing years of concessions, will have a negligible effect on the companies’ bottom lines, analysts say.
Even Fiat Chrysler Automobiles, whose labor costs are expected to rise nearly $2 billion over the life of the four-year contract, won’t bear anything close to the heavy burdens of past UAW deals, particularly because retiree health care is no longer a factor.
“I think it’s more expensive than they were expecting,” said Art Schwartz, a former top negotiator for GM who now works as an industry consultant. “But they can make that up in all kinds of different ways. I don’t think this is going to interfere with profitability.”
That contrasts with executives’ assertions over the past several years that maintaining the two-tier wage scale created in 2007 was critical to keeping the automakers healthy, even as profits started piling up. Through three quarters this year, GM reported pretax profits of $8.3 billion in North America, Ford posted $6.6 billion, and FCA earned $3.4 billion.
“We have got to be careful [not] to say, ‘Well, let’s start disrupting the system,’” Joe Hinrichs, Ford’s president of the Americas, said last year. “The system is working.”