Despite a sharp drop in profits last year largely owing to recall costs, GM will distribute record amounts in profits to its union workers.
The roughly 48,000 union workers for General Motors will see record profit sharing payouts when checks are cut in February with some workers expected to see the $9,000 maximum payout.
The automaker’s contract with the United Auto Workers calls for them to pay $1,000 in profit sharing for each $1 billion in pretax profit in North America. While General Motors reported a pretax profit of $6.6 billion in North America last year, the company has decided to distribute profits based on the $9 billion it would have seen pretax in North America had it not been for the costs of its many 2014 recalls.
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“That really is recognizing the hard work that the entire team did in 2014 to support our core underlying performance,” said GM Chief Financial Officer Chuck Stevens. “That’s what we want to to, to make sure we recognize the hard work of the entire team.”
UAW response to GM
The United Auto Workers were quick to note their excitement following the announcement.
“General Motors announcement today leaves no doubt about the strong, stable environment the GM/UAW collective bargaining agreement created,” said UAW President Dennis Williams. GM has demonstrated that the company can profit, shareholders can have value and our members can be rewarded for their hard work.”
While the profit-sharing is limited to pretax profit in North America, General Motors had a reasonably good year overseas. Europe’s struggling economy aside, General Motors was able to significantly cut its losses in 2014 though still saw a loss of $869 million. Latin America was once again profitable for the company with a profit of $327 million. Additionally, its international operations including China, Asia and Africa saw profits of $898 million.
Higher dividend and 2015
CEO Mary Barra also announced that GM would increase its Q2 dividend by 20 percent to $0.36 per share.
“Our intention to increases the dividend is consistent with our balanced capital allocation strategy and reflects the confidence we have in the growing strength of our business,” said Barra. “Our goal is to maximize long-term shareholder value through both stock price appreciation and return of capital.”
General Motors is expected to deliver and even stronger 2015 largely due to falling gas prices as well as a number of new models being introduced.