State of the Union January 12, 2011

Jan. 12, 2011 online at www.uawlocal2250.com

Reminder: Sign-ups for the election committee election are at the Union Hall and run through Thursday, Jan. 13. Also, the deadline for submitting resolutions to the National Agreement is Friday, Jan. 14. You can get forms from – and return them to – the work center, the Union Hall, or your committee person.

From the Detroit Free Press: As General Motors seeks to fully fund its pension funds, its chief financial officer plans to change the assets to more bonds and fewer equities -- a move that will bring more stability to GM's own market value. GM has a $100-billion pension plan to provide for its 700,000 U.S. retirees, who outnumber current employees 10-1. That U.S. pension plan is twice the size of GM's market value, calculated by multiplying the number of outstanding shares by the current price. "Small swings in the pension plan have massive changes in the value of the company," Chris Liddell told journalists Tuesday. "That's just not a good way to run it." Most pension plans consist of stock and debt investments, with high expected returns, Liddell said. GM wants to move to more fixed assets. In Liddell's ideal pension plan, "the assets exactly match the liabilities, in their maturity and their risk profile," Liddell said. GM's U.S. pensions were underfunded by $17.1 billion at the end of 2009. At the end of last year, the company made a $6-billion contribution -- $4 billion in cash and $2 billion in stock -- to lower that number. GM is to update its underfunding number when it reports fourth-quarter earnings in the coming weeks.

From the Detroit News: General Motors Co. is seeking to tie workers' pay to improvements in vehicle quality — an incentive the Detroit automaker's North American president, Mark Reuss, says will apply to both hourly and salaried employees. "I want to make sure we pay people for superior results," Reuss told reporters on the sidelines of the North American International AutoShow on Monday. "Period." "When we're not performing, I'm not going to be paid out and neither is anyone else," he added. The Detroit automakers' contracts with the United Auto Workers union expire in September. UAW President Bob King, who attended Monday's press preview of the auto show, said his union will consider the proposal. "We're going to discuss a lot of things," King said. "Our members deserve tremendous credit for the sacrifices they made, and for their tremendous personal commitment to quality and continuous improvement." King told The Detroit News last week the UAW is seeking ways for its workers to share in the automakers' rising fortunes, but declined to elaborate further on how it would go about that.

There has been a lot of talk about profit sharing recently as GM continues to rack up earnings. When VP of Manufacturing/Labor relations Diana Tremblay was asked in a recent chat whether profit sharing would be paid out, she answered “yes, as long as we continue to get great results”. Manufacturing Manager Jim Glynn basically said the same thing in a diagonal slice meeting two months ago. So it seems certain that there will be a profit sharing payout. The next question is – how much?

Our profit sharing agreement stipulates that only profits from US operations are used to calculate any payout. Unfortunately, GM does not break out US operations numbers from the North American numbers. Looking at the assembly plants in the US, besides Wentzville, there is: Lansing Grand River (Cadillac CTS), Lansing Delta Township (Chevy Traverse, Buick Enclave, GMC Acadia), Flint (Chevy Silverado, GMC Sierra), Lake Orion (Chevy Sonic, Buick Verano this fall), Hamtramck (Chevy Volt, Buick Lucerne, Cadillac DTS), Fort Wayne (Chevy Silverado, GMC Sierra), Lordstown (Chevy Cruze), Arlington (Chevy Tahoe, Cadillac Escalade, GMC Yukon), Fairfax (Chevy Malibu, Buick LaCrosse), and Bowling Green (Corvette). These plants account for 62 % of the production in North America.

Profits are defined as “income earned by US operations before income taxes and ‘extraordinary items’ (with extraordinary items defined as under generally accepted accounting principles)…..Profits are before any profit sharing charges are deducted.” (Art. 2, section 2.14 of profit sharing agreement in 2007 National Agreement)

Total profit share is the result of the formula spelled out in Art. 2, section 2.17. It will be the sum of 6% of the sales and revenues between 0 and 1.8%; 8% of the sales and revenues between 1.8% and 2.3%; 10% of the sales between 2.3% and 4.6%; 14% of the sales and revenues between 4.6% and 6.9%; and 17% of the sales and revenues above 6.9%.

Through the first 3 quarters this year, North American revenues are $61.1 billion and profits are $4.935 billion. GM executives are saying at the Detroit Auto Show this week that the 4th quarter was “good”. We won’t know how good until sometime in February.

To qualify for a full payment you must have at least 1850 compensated hours, which include vacation, holiday and bereavement time as well as approved leaves of absence. Payment will be made “no later than the third month following the end of the plan year”.

So what’s the conclusion? Obviously, there are too many unknowns to accurately predict a profit share amount, but it could be the biggest payout we have ever seen. So break out the calculators and give it your best shot.