GM, Ford, Chrysler and Boeing Unions Score Big Bonuses and Lift Economy

Feb. 20, 2012 -- At last: Bonuses for ordinary Joes, not Wall Street wheeler-dealers. Union workers at GM, Ford, Chrysler and Boeing are seeing bonus checks of up to $7,000 each.

That money, in turn, is helping boost economies in Detroit, Seattle, Charleston and other cities. The payouts come on the heels of improved or record corporate profits.

GM, which went bankrupt in 2009, Thursday reported 2011 net income of $9.19 billion, an all-time high for the company. Starting in March, part of that profit will go to 47,500 members of the United Auto Workers in checks of up to $7,000 each, according to the Detroit Free Press.

The Lansing State Journal says that 4,690 unionized hourly workers at GM's Lansing facilities will get a total bonus of $32.8 million, a strong boost to the capital city's economy.

Ford and Chrysler also are paying bonuses.

About 26,000 union workers got checks averaging $1,500 at Chrysler earlier this month. Ford, which reported a $20.2 billion profit last year, will pay its workers an average $2,450 starting in mid-March. Ford workers earlier received $3,750, profit-sharing for the first half of 2011.

The windfall might be enough to lift the economy of the Midwest, especially states such as Michigan, Ohio and Kentucky, which are home to union auto factories, economists say. States dependent on the auto industry have already been improving faster than the U.S. economy in general.

Federal Reserve Board data predict Michigan will outperform all other states economically for the next six months.

Donald Grimes, a University of Michigan research specialist who follows labor and the economy, said such performance is the flip-side of the great recession's auto bust. "This is a reversal of the first half of the 2000s, when Michigan and other auto states bore the brunt of the downturn," he told Bloomberg News. "Now, they're getting a bigger share of the recovery."

The bonuses are a dramatic change from the recent past. GM paid no bonuses whatsoever to its union workers from 2005 to 2010. In all but two of those years, Ford and Chrysler paid no bonus, according to Michigan's Center for automotive Research.

Boeing's net income in the fourth quarter improved 20 percent to almost $1.4 billion. Workers in Seattle and in Charleston, S.C., including members of the International Association of Machinists and Aerospace Workers, got their bonuses before Christmas.

About 29,000 machinists in the Seattle-Tacoma region saw checks of $3,500 to $4,000 each. Economist Dick Conway told the Seattle Times the payments would inject $217.5 million into the local economy. In Charleston, bonus checks went to 4,500 Boeing workers.

Retailers, hoping to cash in, have introduced marketing programs aimed at newly prosperous workers. In Michigan, Art Van, the state's largest furniture store chain, has a special promotion aimed at GM workers.

There's plenty of pent-up demand for spending on wants, instead of needs, a store spokeswoman told Bloomberg News. "Many folks," she said, "are beginning to replace furniture, carpet and televisions."

Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass., calls the bonus payments a significant development nationally for labor-management relations.

"Over the past decade," he said, "workers in perhaps a third of contract negotiations did get bonuses, but of a different type: 'signing' bonuses of anywhere from $500 to $7,000 if they ratified collective agreements with wage freezes or cuts."

Profit-sharing bonuses of the kind being paid now by the Big Three are considerably rarer.

"These [profit-sharing bonuses] came about because the UAW was in a unique position, a major union dealing with huge but declining employers who were undergoing managed bankruptcy under the guidance of the White House," Chaison said.

"After they became smaller and restructured, they returned to profitability. Rather than restore wages, they agreed with the UAW to a profit-sharing arrangement, under which workers receive bonus payments based on the profitability of the company," instead of their traditional 3 percent a year wage increase.

For most union workers in the United States, Chaison says, a traditional percentage increase is still the norm. The change at GM, Ford and Chrysler is significant because, "the auto makers and the UAW are the big-timers, when it comes to negotiation. They're the trend-setters."

"What happens in autos usually gets copied in heavy manufacturing in general," he said, "and then in smaller manufacturing."