American Morning

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November 19th, 2010
06:00 AM ET

Gut check: Do GM profits = pay raises?

By Carol Costello and Ronni Berke

The scene would have been inconceivable just a few years ago: management and union standing together at the New York Stock Exchange as the new General Motors went public.

It was a truly new day, not only for GM, but for – don't laugh – bipartisanship.

“We understand that to be globally competitive, we have to work together," says United Auto Workers president Bob King. "There's so much division and partisanship in America. Here's labor and business and government all working together to keep jobs in America."

To accomplish that, thousands of UAW workers retired early. Wages for senior workers are frozen at about $28 an hour, while new hires now make 50 percent less – $14 an hour, or about $30,000 a year. Fat pension plans are gone for new employees; they now contribute to 401k's.

The painful cuts have led some union workers to feel betrayed by union leaders. Still, the UAW accepted the changes and GM’s CEO credited them and increased worker creativity for his company's resurgence.

"It's inspiring how good the company has come out of this, and it's largely because of the employee base," says GM CEO Dan Akerson.

General Motors is projected to make $5-6 billion in profits this year. If GM continues to prosper, should employees prosper too?

It's a valid question. Negotiations on a new union contract starts next year. "We're paying competitive rates vis-a-vis our competition," Akerson adds. "A success-based pay structure is what we strive for, like you do in most businesses."

For the union, that sounds promising. Its goal is to share in the company's "upside" while helping the auto industry remain viable. "It's a different world we're in," says King. "Top management at General Motors recognizes you've got to work together everyday and when there's an upside, workers have to share in that upside. We will."

Yet many economists say even if your company is healthy, it's unlikely you will get any substantial raise as long as the unemployment rate remains high. There's no incentive for companies when a hundred people are standing in line for your job. However, even in better economic times, wages in recent decades have been stagnant. Commerce Department statistics, adjusted for inflation, show that from 1990-2008, middle class incomes rose just 20 percent.

And most of that happened in the first decade. After 2000, when many businesses were fat and happy, income stagnated. Shareholders profited, but middle class workers did not. The current economic downturn has hit wages hard. According to the Bureau of Labor Statistics, hourly wages increased only 1.7 percent over the past year, but because companies did hire workers for more hours, weekly pay was up. Increases were even lower in manufacturing.

Gut Check: If GM profits, should workers share the wealth?


Filed under: American Morning • Economy • General Motors
soundoff (21 Responses)
  1. Titus

    I don't know about about GM, but making 70K myself, I can asure you that I pay about 25k for Federal and Local taxes, so a 5% hike on my family, which I can't afford, to let the 6% hike on the hoarding rich is a fair exchange. C'mon Shylock Republicans, let the Bush Failed tax cuts expire. We voted gridlock, we voted deficit reduction, we voted to end the Bush failures.

    December 2, 2010 at 11:01 am |
  2. LIZ CARTER in GEORGIA

    TAXPAYERS' MONEY? It's really not ours once we PAY it to the government. Our money is what we net from our incomes; other than taxes, everything else that is deducted from our incomes is optional or voluntary! Do you people realize that most of us get refunds back of the tax money we paid that is suppose to be ours! The rest belongs to the offices of government to use as they see fit, whether it be right or wrong! WE DIDN'T LOAN THEM THE MONEY, WE PAID OUR TAXES! They don't owe US back anything, really!

    November 21, 2010 at 7:15 pm |
  3. LIZ CARTER in GEORGIA

    You know people, it's so odd that the term 'taxpayers' money' has become such an angry source of conflict and confusion to the AMERICAN people! The media and even our government officials are using it as leverage to beat this administration over the head and to be honest, there's no such thing!' HOW OFTEN DID WE HEAR THOSE TWO WORDS PUT TOGETHER DURING THE BUSH ERA? I don't remember them ever! Expecting to be paid back was never even an issue for us! Once we PAY federal and state taxes, it's theirs to use!

    November 21, 2010 at 7:02 pm |
  4. Jane

    THE Gov should be paid back first and then after GM is stabilized , and the economy is more secure, pay the workers more. Jane.

    November 21, 2010 at 2:19 pm |
  5. LIZ CARTER in GEORGIA

    @Pauly, I agree with you on everything you commented. However, the president was salaried at $400, 000 a year when W went into office and even for years before him. Congress members have been earning $200,000 for years.

    November 21, 2010 at 2:20 am |
  6. AL

    It's just amazing to read how ALL these people are experts on how GM runs on the inside of the plant. Hourley people work their tails off everyday. In 2008 we gave up scheduled pay raises until 2011. Within 6 months management got their "shared sacrifice" money reinstated to them. Then in February of 2010 all of management got a 3-5% raise!!!!! Where is the equality in that? UAW hourly people have not had a raise in 6 years. However, GM management continues getting raises. The rest of the world never hears about that. And who ran the company into the ground in the first place???? GM management, NOT the UAW. UAW does not run the place. And for ALL the people in the world who think that it's UAW wages responsible for the price of cars answer me this. Since all these wages cuts to 14 bucks an hour, has the price of cars gone down?? No, they continue to go up. Why?? Executives in Detroit getting million dollar bonuses while crying about paying people 28 bucks an hour. Hourley labor only accounts for 10% of the total price of the car. All you "know it all" people have NO IDEA how things really run inside the company.

    November 20, 2010 at 6:42 pm |
  7. AL

    It's just amazing to read how ALL these people are experts on how GM runs on the inside of the plant. Hourley people work their ass off everyday. In 2008 we gave up scheduled pay raises until 2011. Within 6 months management got their "shared sacrifice" money reinstated to them. Then in February of 2010 all of management got a 3-5% raise!!!!! Where is the equality in that? UAW hourly people have not had a raise in 6 years. However, GM management continues getting raises. The rest of the world never hears about that. And who ran the company into the ground in the first place???? GM management, NOT the UAW. UAW does not run the place. And for ALL the people in the world who think that it's UAW wages responsible for the price of cars answer me this. Since all these wages cuts to 14 bucks an hour, has the price of cars gone down?? No, they continue to go up. Why?? Executives in Detroit getting million dollar bonuses while crying about paying people 28 bucks an hour. All you big mouth people have NO IDEA how things really run inside the company.

    November 20, 2010 at 8:03 am |
  8. Chas

    1. GM should be required to payoff the bailout money.
    2. Customers should get special deals.
    3. GM should apologize for years of making substandard automobiles.
    It's a valid question. Negotiations on a new union contract starts next year. "We're paying competitive rates vis-a-vis our competition," Akerson adds. "A success-based pay structure is what we strive for, like you do in most businesses."
    And Mr. Akerson state specifically WHO is your competition; Ford, Toyota, Honda? And are we talking US workers or the "We're competing globally" excuse when telling American workers they're being laid off or pay isn't increasing!
    Many people will buy GM however after years of poor quality and lack of dealer support I left GM in '85 and will never return.

    November 19, 2010 at 2:48 pm |
  9. Pauly

    The American worker has been taking it on the chin since the Great Recession began. Corporate America wants to continue the assault. The sad part is that so many Americans are siding w/ them.

    Let's cut workers' wages, benefits, pensions. Let's abolish the minimum wage & raise the retirement age. Lets get rid of the unions & even class action lawsuits. That way, workers will never be able to get justice when these corp's skirt the employment laws. Let's not extend unemployment benefits so more people will have to work at jobs that don't pay & offer no benefits.

    While corporate America is posting record profits, workers are expected to give more & more. Citibank, just one out of many, took tens of billions in TARP money. They then laid off 50,000 workers. Only to turn around & give ridiculous bonuses to their management. They don't have money to pay their workers but spend billions on lobbyists & campaigns to elect people who will vote for bills that help them prosper.

    Some workers have great pensions in this country. They worked hard for 20-30 years to earn them. Many CEO's are rewarded w/ ridiculous salaries, bonuses & golden parachutes & spend a lot less time at the company.

    Worst yet though are the lawmakers in this country who have pensions that even pay them all or most of their last salary after they are convicted & sent to prison! They also have great health care for life. Social Security recipients won't be getting a COLA increase for the 2nd straight year. Since Conressional COLA is calculated differently, I'm sure they will be getting another increase this year, just as they did last year.

    While the American worker continues to sacrifice & suffer, the GOP & some Blue Dog Democrats want to reward themselves & their wealthy cronies by extending all the tax cuts. When W took office, the salary for the President was $200,000.00 a year. Now everyone in Congress is making close to that! And they will collect close to that after they leave office! And people are calling the American worker greedy?

    November 19, 2010 at 8:51 am |
  10. Scott

    What they need to do is stop tying CEO bonuses to the stock price. When they do that, the execs do not have a reason to make decisions that improve long term viability. Rather, it is better for their bottom line to make decisions that artificially boost the stock for a short time during which they can cash in their options.

    CEO and exec bonuses should be tied to an average of the companies performance over a 5 year period.

    November 19, 2010 at 8:38 am |
  11. Ray Boney

    Who was the person who came and started this whole bailout business? Who is the guy that has good things happening for America if you stop listening to all the DC bickering and really look at the issues...Our President thats who, President Obama. I am shocked that during that whole story I never heard thank you to federal government, or anythinig about President Obama. Mind you had this been a bnad situation his name would have been drug through the mud. I bet its some red neck workers at GM right now that still dont appreciate the bailout plan . As for the money return, YES pay the federal government back what it deserves FIRST, then make sure they implement a plan to keep this from happening again, not go off and have a Big Blowout Weekend somewhere..as for the employees they need to decide if they are in it for the long haul and buy into their company..Get back to the basics before its too late...

    November 19, 2010 at 8:33 am |
  12. Ed

    Why is it never reported that the GM bailout was not only financed by taxpayers, but also on the backs of thousands, possibly millions of burned former stockholders like me. What was the value of the stock that was wiped of the books to make the deal happen?

    November 19, 2010 at 7:51 am |
  13. mike sey

    Workers compensation should be tied to the compensation executives receive – whether that be in the form of raises, bonuses, stock options, golf club memberships, golden parachutes, or what have you. If the CEO gets more, the workers should too. Fat chance!

    November 19, 2010 at 7:44 am |
  14. John G Noah

    November 19, 2010, 3:46 AM

    CNN AM Fix – Was Not For Bailout
    Taxpayers Must be paid in full with interest. Before any pay raise or increase in benefits to employees and retirees at GM and subsidiary that GM pays wages. Taxpayers must be out of the equation. It is unfortunate That America’s Corporate I-Con did not manage business well and taxpayers are involved to start with. Actually I think employee and retirees greed destroyed GM.
    JOHN

    November 19, 2010 at 7:18 am |
  15. Michael Armstrong Sr.

    All pay should stay frozen until every last penny is paid back to the country this company is jumping the gun thinking that there good fortune is going to hold up they need to wait for a year before they claim victory .

    November 19, 2010 at 7:00 am |
  16. Rick

    Now that the relationship between company & union has come full circle it only stands to reason that they must work together, share together and sacrifice together. YES the workers should share in the profit but by way of bonuses not pay raises. That way if next year is not as profitable the company at least will not have to incur the added salary expense only to have to ask for concessions from the union again.

    November 19, 2010 at 6:58 am |
  17. Al Alexander

    Once all the back bills are paid to the Government, GM should reward employees for profitability to maintain loyalty and the 'team" spirit. The awarded must be in non permanent bonuses which won't become part of base salary. Employees would be motivated and not return to the lazy practices of the past.
    AA

    November 19, 2010 at 6:50 am |
  18. Bryan

    Unions were needed years ago...like in the 1940s but we have employment laws in place now, get rid of them. Ask them to give up some of their rates in this economy and see what happens. In regards to pay increases for employees at GM...maybe a slight increase once they are profitable but most industries have had salary and bonus freezes in place for the past few years. Companies coming out of debt need to be incredibly conservative and not give away all of the profits right off the bat! Be grateful the company you are employed with managed to survive the past few years, weather the storm with them and look for raises once they are back on their feet and financially STABLE!

    November 19, 2010 at 6:48 am |
  19. MeLoN

    I am still shaking my head @ the fact that the union – that spent almost 100 years trying to destroy GM now is part owner of it. Only in the US can this bizarre scenario take place. The greed of the union is/was a major part in the failing of the old GM – along with mismanagement of the corporation. My mother and sister both retired from GM and I have only owned GM products for more than 30 years.

    To answer your question ... no the employees shouldn't share the wealth – outside of their wages unless they also own stocks in the company. It's a business and the profits should go to the owners of it.

    November 19, 2010 at 6:46 am |
  20. Elyahme

    Leave the salary as it is, BUT establish profit share checks...

    November 19, 2010 at 6:45 am |
  21. Dan

    Of course employees should share in this "miraculous" turn around, getting pay raises, RIGHT AFTER GM pays off fully and completely the loan they owe the American Tax Payers.
    As far as new employees starting out at $14.00 an hour.
    My wife is an LPN, just started a new job, and is only making $16.00 an hour, so what's wrong with $14.00 an hour?

    November 19, 2010 at 6:37 am |