GM to pay more than $400 million in worker bonuses

by
February 15, 2011

By TOM KRISHER

DETROIT (AP) — Less than two years after entering bankruptcy, General Motors will extend millions of dollars in bonuses to most of its 48,000 hourly workers as a reward for the company’s rapid turnaround after it was rescued by the government.

The payments, disclosed Monday in company documents, are similar to bonuses announced last week for white-collar employees. The bonuses to 76,000 American workers will probably total more than $400 million – an amount that suggests executives have increasing confidence in the automaker’s comeback.

In the four years leading up to its 2009 bankruptcy, GM piled up more than $80 billion in losses and was burdened by enormous debt and costly labor contracts.

“On the whole, we made tremendous progress last year,” CEO and Chairman Dan Akerson said Monday in an e-mail message to employees announcing the payments. “With our collective teamwork, this can be just the beginning.”

The company made $4.2 billion in the first nine months of 2010 and is expected to announce a fourth-quarter profit soon.

Most of GM’s hourly workers will get a record payment of more than $4,000 – more than double the previous record in 1999, at the height of the boom in sport utility vehicles and pickup trucks. Nearly all 28,000 white-collar workers such as engineers and managers will get 4 to 16 percent of their base pay. A few – less than 1 percent – will get 50 percent or more.

Bill Selesky, an auto industry analyst with Argus Research in New York, called the recovery “dramatic” and said the payments were needed to stop talent from jumping to other automakers, especially crosstown rival Ford.

The company, he added, is also trying to send a message: “It’s the new GM.”

But the bonuses drew criticism from an opponent of the auto industry bailout in Washington who said GM should repay its entire $49.5 billion loan before offering bonuses.

“Since the taxpayers helped these companies out of bankruptcy, the taxpayers should be repaid before bonuses go out,” said Republican Sen. Charles Grassley of Iowa. “It sends a message that those in charge take shareholders, in this case the taxpayers, for a sucker.”

The government has been repaid $23 billion but needs $26.4 billion more to recoup its whole investment. The government still owns 500 million shares of GM common stock, which would have to sell for roughly $53 per share to get all the money back.

The GM documents show that the company plans to pay hourly workers at least $189 million in bonuses next month. About 45,000 workers at GM factories will get more than $4,000 each. Another 3,000 workers at old parts plants that GM is trying to sell will get $3,000 each.

The company would not say how much the white-collar bonuses will cost, but calculations made by The Associated Press show the total will probably top $200 million.

Most GM salaried workers earn in excess of $100,000 per year. A bonus of 8 percent, the midpoint of the range, would give them roughly $8,000 each. That means GM would pay out roughly $224 million.

Final numbers for the bonuses will not be calculated until after the company announces its fourth-quarter and full-year earnings from 2010 later this month.

Chrysler, which needed a $12.5 billion bailout, plans to pay bonuses as well. The government owns about 9 percent of Chrysler stock.

The size of the white-collar bonuses could become an issue later this year when the Detroit Three begin contract talks with the United Auto Workers union. The master contract with all three companies expires in September.

To read more, visit: http://hosted.ap.org/dynamic/stories/U/US_GENERAL_MOTORS_BONUSES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-02-14-12-32-31

1 Comment - what are your thoughts?

  • Robert Greer says:

    How can GM justify bonuses when they are still in deep debt to the American Taxpayers. When GM has paid off all of its public debt and becomes truly a public company then bonuses could be justified.

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