Oct 25, 2004
For many years, U.S. auto workers have been persuaded to accept profit-sharing deals in their contracts, instead of the previously traditional three% yearly raise.
Workers' hopes are regularly raised by news reports such as "GM earns 3.06 billion for first nine months of 2004," or "market share grows in all four global regions in the most recent quarter," or even the GM CEO's statement, "we do have $25 billion in cash." All of those statements were made in early October, in regard to GM's third quarter report.
But the largest headlines were reserved for a different spin. "GM profits far below expectations." "GM must cut 12,000 jobs." "Perfect storm sinks GM profits." And workers' hopes for profit-sharing sank, too.
How can these different headlines be referring to the exact same company at the exact same time? It's simply a matter of which set of books are on display. The corporation which has 25 billion dollars in cash and made over three billion dollars profit in nine months includes many legal-fiction divisions, including the fabulous GMAC finance company. GMAC shows nine quarters of continually improving profitability on its books.
GM North American automotive operation shows on its books a third-quarter loss of 22 million dollars. Conveniently for GM – and not so conveniently for the workers – it's these operations alone on which profit-sharing is calculated. Meanwhile, payouts to stockholders are calculated on the earnings of the corporation as a whole!
Matters stand similarly at Ford and DaimlerChrysler. Stockholders – and execs – receive dividends based on the earnings of the entire corporation; workers receive profit-sharing based on the part of the company whose books show no profit.
These books couldn't be better cooked if Martha Stewart and Ken Lay were stirring the pot together.