Saturday, February 11, 2012

Chrysler profit triggers profit-sharing checks

By Paul A. Eisenstein, The Detroit Bureau

Chrysler workers have a variety of reasons to be pleased about the maker’s improving fortunes. They’re not only seeing thousands of jobs added but receiving their first profit-sharing checks since 2005 as a result of the maker landing in the black for the first time since 1997.

Meanwhile, Sergio Marchionne, the CEO of both Chrysler and Fiat, said the U.S. makers positive net offset a deficit at its Italian rival, which has been hammered by the European financial crisis – which has been particularly severe in Italy.

Marchionne wrote to U.S. hourly employees – who negotiated an improved profit-sharing formula as part of last-year’s new contract with the United Auto Workers Union, advising them they would get an average $1,500 each.

“This is a reward that you have earned,” Marchionne proclaimed. “Your efforts rewrote the history that so many naysayers had forecast,” he added, a reference to the many outside skeptics who argued in favor of shutting down Chrysler rather than approving the maker’s 2009 federal bailout.

Chrysler reported $183 million in net earnings for 2011, though the profit-sharing formula will take into account the $225 million earned in the fourth quarter.

Chrysler’s financial turnaround stands in sharp contrast to the performance of its Italian partner, Marchionne noted during a conference call to discuss the maker’s finances.  The fourth-quarter results offset losses by Fiat, the executive explained, stressing that this was an unacceptable situation.

“That is the definition of what I would call an unhappy marriage, so somebody better get off their butts and snap onto the grid,” said Marchionne, “because we are not pulling the cart here.”

For the year, Fiat reported a profit of $3.2 billion, double what it did in 2010 – but removing Chrysler’s contribution, the 2011 number would have dropped 6% to $1.37 billion.

The decline reflects both the weak European economy but also the fact that Fiat’s home market assembly plants are notoriously inefficient.  Marchionne has been pressing for productivity improvements and already won some changes from Italian unions.  But he is demanding more – while warning that Fiat could shift resources out of Italy, possibly to the Chrysler side of the trans-Atlantic alliance.

“We cannot continue to subsidize a sub-optimal, inefficient manufacturing asset based on the basis of ideology,” he said during the call.

The situation for American workers has improved significantly, however, after years of cutbacks and concessions.  The $1,500 profit-sharing checks follow payment of a $1,750 per worker ratification bonus issued after UAW members approved their new contract.  They will get another $1,750 check once Chrysler achieves four consecutive quarterly profits.

Meanwhile, the maker is rapidly adding new jobs in the U.S., after a decade of cuts.  That includes nearly 2,000 at the Jeep and Viper plants in Detroit and more than 1,000 Marchionne confirmed will be added at a factory in Belvidere, Illinois. It will get a third shift to handle production of the new Dodge Dart sedan.

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