Despite reporting a sharp drop in profit because of its safety crisis last year, General Motors said Wednesday that it would give its union workers profit-sharing checks that exclude the costs of a record number of vehicle recalls.
GM, the nation’s largest automaker, said it would give each of its 48,000 union workers in the United States a payout of up to $9,000, a figure based on North American earnings last year but without factoring in big charges for more than 80 safety recalls.
In reporting its fourth-quarter results, GM said it earned pretax profits of $6.6 billion in North America last year. But without the cost of the recalls, the pretax earnings were $9 billion. The automaker’s union contract calls for it to pay about $1,000 in profit-sharing for each $1 billion earned in pretax profits in North America.
The decision to subtract recall costs from the workers’ profit-sharing came after weeks of discussions between GM and the United Auto Workers union. GM officials said the decision not to factor in the recall costs — which would have trimmed each payout by $2,400 — was made by company executives and was not based on a formula in the contract. GM said the $9,000 figure was a combination of regular profit-sharing plus a $2,000 performance bonus that the company chose to add to the payout package.
For the year, GM reported net income of $2.79 billion, a 31 percent decrease from $3.99 billion in 2013. Revenue and vehicle sales were similar to the year before. GM reported revenue of $155.9 billion for 2014, up slightly from $155.4 billion the previous year. The company sold 9.93 million vehicles last year, compared with 9.72 million in 2013.
The automaker had better results during the fourth quarter than for the year-ago quarter, and it avoided additional costs for recalls. The company said it had recall-related costs last year of about $2.8 billion, including $400 million for a compensation for victims of a faulty ignition switch, which GM knew about for more than a decade before it initiated its first recall last year.