All profit if GM workers take stock

October 14, 2010

All profit if GM workers take stock


Used to be that "getting a piece of the action" in the Detroit auto industry amounted to nothing more than slang for the fat cash bonuses and stock options collected by top executives.

That may start to change in a twist that could fundamentally transform the relationship of active union autoworkers to their leaner, more fiscally aware employers — and give new meaning to the term "pay for performance."

As federally owned General Motors Co. moves closer to its planned initial public offering, the automaker says it wants to give its dealers, retirees and employees — including members of the United Auto Workers — a chance to become owners of the recapitalized company.

Yes, the UAW’s health care trust fund controls a 17.5 percent stake in GM. Yes, a successful IPO offers a chance for the trust fund’s managers to take their stake and liquidate, hold or some combination of both to finance health care benefits for retirees. But facilitating direct share ownership by individual union members?

It’s an idea whose time has come, recognition that everyone who works for these companies — from assembly line hands to the skilled trades, from the salaried ranks to top executives — shares interests in the company’s performance. They should profit when times are good, when their cars and trucks do well, and they should share the pain when times aren’t so good.

Whether any, some or all of GM’s work force seizes the opportunity to buy shares may be less important, however, than the unmistakable cultural shift it would signify: Namely, that employees at all levels of Detroit’s automakers could be more tightly linked than ever before to the financial success of their reorganized enterprises.

That’s not all.

GM’s IPO and the early months of public share ownership next year will coincide with a) the likely payouts of bonuses and profit-sharing at rival Ford Motor Co. and b) the run-up to national contract talks between the UAW and Detroit’s automakers, likely to be the most complicated in recent memory.

Which means GM’s gambit to encourage employee participation in its IPO won’t be the end of process. It would be a beginning, the opening round in bargaining table discussions aimed at broadening (and arguably enriching) hourly profit-sharing plans to include bonus metrics for cost, quality and warranty, as well as the usual profitability in the U.S. market.

Also possible is bargaining to award UAW members company stock as part of an expanded profit-sharing plan, according to ranking executives familiar with some preliminary ideas being discussed at high levels.

The changes could be mutually beneficial, even if they would challenge antiquated notions inside the union of what constitutes financial "security," how it has been traditionally understood and defined, and whether union and salaried ranks should be treated alike.

The thinking goes like this:

UAW members could reap greater financial benefits because their awards would not be pegged only to profits from U.S. operations, which have been pretty rare over the past decade. Payouts also would be tied to quantifiable metrics that improve the overall competitiveness of the company and theoretically make it more valuable to investors of all kinds.

Aside from cash, profit-sharing payouts could include grants of restricted stock required to be held for at least a year before any portion of them could be sold. Among the advantages, according to one executive familiar with the numbers, would be more regular payouts than the long drought of recent years.

The benefits to the automakers? Uniform incentives from the top of the house to the factory floor, for starters. Second, a tighter rein on fixed labor costs, crucial to avoiding the "inflators" of sweetened pension payments and automatic cost-of-living increases that would widen the narrowed labor-cost gap with foreign rivals.

If there’s one imperative in next year’s contract talks — for union and company alike — it is finding a way to share the wealth that will come with leaner operations and recovering sales while simultaneously maintaining the hard-won cost parity with foreign rivals.

A tricky sell? Probably. But clinging to the old ways amid fierce competition and expecting a different result would mean that the searing experience of the past few years taught nothing. It should have.

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