On the strength of a $5.7 billion profit in North America in 2012 (and $1.6 billion in the fourth quarter alone), Ford Motor Co. has announced that in March it will issue profit-sharing checks to approximately 45,800 hourly United Auto Workers members at U.S. Ford plants. Reports indicate that the average amount of the profit-sharing checks will be a record $8,300 per employee.
Ford profit-sharing checks a plus for Michigan economy
Robert Dye, chief economist of Comerica Bank, commented that Ford’s strong showing in 2012 is excellent news for Michigan’s economy.
“The expected increase in profit-sharing checks for autoworkers this March is (great) news,” said Dye. “It will help to buffer households from the drag of higher payroll taxes,” which went up 2 percent for U.S. workers on Jan. 1.
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In terms of economic impact per worker – where a multiplying ripple effect is accounted for – the $8,300 profit-sharing check will equate to about $20,750, said David Sowerby, portfolio manager for Loomis Sayles in Bloomfield Hills, Mich.
“While we encourage savings for the long term, spending it locally, especially on made-in-Michigan products, is a bigger economic multiplier,” Sowerby said. “It gives us a decent boost.”
Best profit-sharing checks since 1999 (inflation-adjusted)
The previous profit-sharing record for Ford’s UAW workers was $8,000 in 1999. Adjusted for today’s inflation, however, that would be nearly $11,000. This year’s profit-sharing checks also mark the fourth straight year since Ford avoided bankruptcy at the inception of the automotive crisis that dragged companies like GM into bankruptcy.
“Fewer autoworkers may mean fewer total profit sharing dollars circulating in the Michigan economy compared to a decade ago,” Dye said. “But it is still good news to see an increase in the size of checks this year.”
Ford employees paying down debt
Various financial planners who work with Ford’s UAW employees have indicated that their clients are primarily committed to using the sizable profit-sharing checks to pay down debt. It’s a fine idea, as without a savings program, the temptation is to spend it all immediately, perhaps impulsively.
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