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Ford to Hand Out $5,000 Profit-Sharing Checks to Hourly Workers

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Jan. 28 (Bloomberg) -- Ford Motor Co., set to negotiate a new labor contract this year, said it will pay its 40,600 U.S. hourly employees profit sharing checks averaging $5,000 after announcing 2010 net income of $6.56 billion today.

The payout will be the most since Ford handed out profit sharing checks averaging $6,700 in 2000, according to the Center for Automotive Research in Ann Arbor, Michigan. Last year, Ford gave hourly workers checks averaging $450, the first such payout in six years, after reporting 2009 net income of $2.72 billion.

“It’s a great pleasure that we’re a profitable company again and that we’re paying profit-sharing in a significant sum,” Chief Financial Officer Lewis Booth told reporters in Dearborn, Michigan today. “It’s a delight.”

Sharing the benefits as the industry recovers will be a focus of contract talks this year between the United Auto Workers and Ford, General Motors Co. and Chrysler Group LLC. UAW President Bob King has said he aims to recover some of the $7,000 to $30,000 in concessions each worker gave up since 2005 to help U.S. automakers survive the worst market in 27 years.

“All the sacrifices that our members made to turn these companies around were part of the process that’s really led to this amazing turnaround,” King said in a Jan. 4 interview. “We want our membership to share in a very meaningful way in the upside of these companies.”

The payout at Ford and possible profit-sharing checks GM may give its workers will not resolve the UAW’s demand to participate in the industry’s prosperity, said Sean McAlinden, chief economist at the Center for Automotive Research. A new formula for variable compensation for hourly workers must be negotiated before UAW contracts expire in September, he said.

Signing Bonus

“Profit-sharing checks will work if they are tied to a new formula that might guarantee a ‘fixed’ bonus every year and a ’performance’ bonus tied to company outcomes on earnings and quality,” McAlinden said. “To further sell this, of course, will require a whopper, record signing bonus in October, which no worker can turn down.”

Ford told its salaried employees Jan. 13 that it won’t grant them raises this year because their pay is competitive with companies such as GM, Pfizer Inc. and Boeing Co. Ford restored raises to its 20,000 U.S. salaried employees last year. That caused the UAW to file a grievance accusing the automaker of violating an “equality of sacrifice” pledge.

To help the automakers survive, the union surrendered raises, bonuses and cost-of-living adjustments. The UAW also agreed to a two-tier wage system, in which new hires earn about $14 an hour, half the amount paid to senior production workers.

King said he is already talking to the U.S. automakers about ways to reward workers for what they gave up.

“We’ve expressed very strongly” the union’s view to GM, Ford and Chrysler, King said. “And they’re very interested in finding a way to make sure our members do share in the upside.”

To contact the reporter on this story: Keith Naughton in Dearborn, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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