GM to Trim Executive Bonuses After Recalls

Updated on

The cost of General Motors Co.’s massive ignition-switch recall will cut into executives’ bonuses for last year, even as UAW members’ profit-sharing payments exclude those billions, said two people familiar with the matter.

GM is paying bonuses to UAW members of as much as $9,000, setting aside $2.4 billion in recall-related costs. GM typically doesn’t count one-time charges like recall or restructuring costs when calculating hourly-worker profit sharing, because the payment is designed to reflect the ongoing performance of the business, said spokesman Tom Henderson. He declined to comment on non-union bonuses.

Those costs will also be excluded from bonus calculations for most of the Detroit-based automaker’s white-collar staff, which are based on a blend of regional and global results, said the people, who asked not to be identified revealing private compensation matters. Top executives won’t get the same treatment, the people said. GM discussed bonuses on a webcast with salaried workers today, the people said.

“The optics of not reflecting the recall costs into executive bonuses would be really bad,” said Maryann Keller, an independent consultant in Stamford, Connecticut. “In this case, the recall was precipitated by past management, but that’s just the way it is.”

Upcoming Negotiations

For GM’s union workers, who received $7,500 in profit sharing last year, the unfettered bonus checks could serve as a goodwill gesture from management before they sit down to hammer out a new four-year labor deal. The current pact expires in September.

The United Auto Workers union is already seeking pay increases for its members. Veteran workers make $28 an hour and those at GM and Ford Motor Co. haven’t had a raise in 10 years. Newer hires brought in after the 2007 labor agreement now make $16.28 an hour. The union wants raises for both groups of workers, UAW President Dennis Williams said last year in a conference call with reporters.

“Where does the responsibility sit?” Keller said. “Ultimately it rests with the senior executives. The rank and file hourly person should not be penalized for something that had nothing to do with the nature of their job.”

(Updates with consultant’s comment in fourth paragraph.)
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