US automakers are keen to follow compensation method of Japan counterparts

Article by Christian A., on March 24, 2011

U.S. automakers may emulate how their Japanese counterparts and salaried employees are paid and may seek to begin providing up to 15% of union workers' compensation in performance bonuses and lump-sum payments.

Sean McAlinden, chief economist for the Center for Automotive Research, said that General Motors, Ford and Chrysler Group may attempt to evade having to grant annual increases to their 107,000 hourly employees as they negotiate new contracts with the United Auto Workers this year.

What the companies will offer instead are bonuses that total to as much as $10,000 annually that would partially depend on meeting productivity and quality goals.

UAW President Bob King, who convenes the union's bargaining convention in Detroit beginning Tuesday, said that he is open to new forms of profit sharing.

If the union says yes to having more of their pay at risk, it would be the most significant change in compensation practices since the 1950s when former UAW President Walter Reuther won wage guarantees for laid-off autoworkers.

McAlinden, a former autoworker who is based in Ann Arbor, Michigan, said that King is on the brink of establishing a “revolutionary new design for compensation in the auto industry."

He said that this plan is in line with King’s goal of “sharing in the success of the companies." It’s likely that the issue of variable pay will be taken up at the quadrennial bargaining convention, where over 1,200 UAW officials will lay down strategy for this year's contract talks. The UAW's four-year agreements with GM, Ford and Chrysler will expire in September.

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