Tariffs will cause drop in autoworkers' profit-sharing checks, bonuses, analysts say

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The economic fallout from President Donald Trump's auto tariffs, if they remain in place, will reverberate beyond higher prices in dealership showrooms and service lanes. The impact will be felt in the paychecks of nearly 146,000 union workers and tens of thousands of salaried employees across the Detroit Three automakers.

On Wednesday, the industry glimpsed a dash of hope when Trump said he'd do a 90-day pause on reciprocal tariffs. But it was soon clear that the pause did not include a suspension of 25% tariffs on imported autos and auto parts into the United States.

Given that, several auto analysts agreed that a decline is likely unavoidable in annual profit-sharing checks to UAW-represented workers and bonuses that salaried people earn. As Dan Ives, a managing director at Wedbush Securities told the Free Press, the payouts could be, "dramatically lower to nothing," as a result of the hit tariffs are expected to deliver to the automakers' profits over the next year or two.

At the request of the Detroit Free Press, Patrick Anderson, CEO of East Lansing-based consultancy Anderson Economic Group, said his team spent a week doing the math and projected that the Detroit Three will see a reduction of about $5 billion in "operating profits" in North America for the rest of this year due to tariffs. That decline will hit the labor force in their wallets.

“If you’re an (hourly) autoworker, you should assume this tariff effort will cost you $1,000 to $5,000 in profit-sharing for this year," Anderson told the Free Press. "There are also reductions that will happen to bonuses and earnings that go to salaried workers and executives. There's going to be reductions in earnings to suppliers, too."

Anderson could not project a figure for the impact on salaried workers' bonuses because the formulas are more complicated than those used for the UAW profit-sharing and are not shared publicly. But he said, "This is a very expensive policy change by the government and Michigan is the most vulnerable state for the auto tariffs."

The end of big profit-sharing

Last week, Trump enacted 25% tariffs he imposed on imported vehicles and parts, providing an exemption until May 3 for some parts that comply with the United States-Mexico-Canada Agreement. Tariffs are taxes importers pay when they bring goods over borders and many experts expect those costs to be passed on to consumers.

The Detroit Three automakers declined to comment for this article on how tariffs could impact profit-sharing or bonuses, but two people familiar with the finances at one automaker confirmed that Anderson's math was "directionally correct" and they said the years of automakers paying out five-figure profit-sharing checks will likely come to a halt. The people asked to not be named because they are not authorized to share that information publicly.

Some Wall Street analysts who reviewed Anderson's math also agreed with it, with some saying it's likely conservative.

The profit-sharing checks are not bonuses but rather are a negotiated formula between Detroit automakers and the UAW in the union's national agreement. The formula for GM and Ford states that qualified employees get $1,000 per every $1 billion in annual earnings in the companies. At GM it is calculated using its "earnings before interest and taxes (EBIT)-adjusted" income in North America. At Ford, profit-sharing is calculated based on company-adjusted EBIT, Ford does not report North America EBIT. EBIT, which some people call operating profits, measures a company's profitability from its core operations. It does not include interest gains and tax expenses, so as to provide transparency into how efficiently a business generates earnings. 

For Stellantis, which makes Chrysler, Dodge, Jeep, Ram and Fiat brands, the profit-sharing amount is based on a slightly different formula that equals $900 per every 1% of North America adjusted EBIT profit margin. The profit margin is calculated by dividing the adjusted EBIT by revenues in North America.

So, General Motors reported in February that its 2024 North America EBIT-adjusted profit was $14.5 billion, up 18% from $12.3 billion a year earlier. Therefore, its 2024 pretax profit-sharing payout for its 45,000 UAW-represented workforce would pay up to $14,500 to eligible employees, compared with the 2023 payout of $12,250.

In February, Ford Motor Co. reported that about 57,000 UAW hourly workers would receive profit-sharing checks up to $10,208 for 2024 based on its North America EBIT-adjusted profit of $10.2 billion. That was down slightly from $10,416 for 2023 and much higher than that of $9,176 for 2022. The individual profit-sharing payments vary because they are based on the employee’s eligible compensated hours. Hourly employees who accrued 1,850 or more compensated hours during 2024 receive the full payout. 

UAW members working at Stellantis saw profit-sharing checks for last year of up $3,780, a drop of almost 73% from the previous year, the company said in February. The company's profit-sharing checks for 2023's performance were at $13,860.

UAW's Fain reacts to possibly lower profit-sharing

Anderson noted that the union's contract stated that if GM's annual North America EBIT-adjusted was $1.25 billion or less, the members do not get profit-sharing checks. If Stellantis' North America EBIT profit margin is 1.9% or less, there are no profit-sharing checks, according to the UAW contract language.

"It’s possible that one of these automakers takes such a severe hit from tariffs that, under the terms of the agreement, their profit-sharing goes to zero," Anderson said. "I’m not forecasting that, but it is possible."

Anderson said the workforce at Stellantis is more vulnerable than those at Ford and GM because Stellantis is already suffering a sales slump with its phasing out of popular gas-powered models and introduction of as-yet-unproven electric vehicles. It is also more vulnerable to tariffs than GM and Ford, with a smaller U.S.-based manufacturing footprint and substantial imported vehicles. It has also already done some layoffs. 

UAW President Shawn Fain supports tariffs, believing they will help drive manufacturing and jobs back to the United States. Asked by the Free Press about the expected damage tariffs will cause to automakers' profits and therefore union members' profit-sharing checks, Fain said the companies have made trillions of dollars and the system benefits the rich.

"The Big Three, and the rest of the automakers, have had record profits for the past 15 years," Fain said in an email. "They haven't used that to reinvest in plants. They haven't lowered their prices for consumers. They haven't given that back to the American taxpayers. And they sure as hell haven't passed those profits along to the workers who make these companies run. What they have done is paid it out to Wall Street to the tune of $367 billion in stock buybacks and over $1 billion in CEO pay."

Ford CEO Jim Farley saw a decline in total compensation for 2024 from the previous year because the Dearborn-based automaker failed to hit performance objectives. For 2024, Farley's total executive compensation was $24.8 million, $1.7 million of which is salary and $1.6 million is incentive compensation, with the bulk of the balance in stock rewards. Stellantis paid its former CEO, Carlos Tavares, more than $24 million in compensation last year. GM has not yet released CEO Mary Barra's 2024 compensation, but in 2023 she received a total of $27.8 million in compensation.

"Now they want us to be all worked up about profit-sharing checks or 401(k) plans so we can help them defend this system that ultimately benefits corporate America, not the American worker," Fain said. "Suddenly, we hear people crying about the disruption in our economy. Meanwhile, the factory workers of this country have had nothing but disruption for decades."

Fain acknowledged fear about what could happen, but "the working class is willing to take some short-term pain if it means finally, finally ending the free trade disaster that has let the Big Three close over 60 facilities in the past 20 years, killing hundreds of thousands of jobs."

The method to the math

Anderson said his team spent a week going over the Detroit Three automakers' finances to estimate impact on earnings, taking into account several presumptions, the first being that tariffs would increase the costs of vehicles overall likely starting in May.

Many industry analysts have estimated the prices on new cars could rise by $1,000 to $20,000 depending on the vehicle and the amount of imported parts. While some automakers are holding off price hikes for now — Ford and Stellantis are even offering employee pricing on new vehicles — most analysts anticipate that by early summer an increase in prices is inevitable. GM has reacted to the tariffs by saying it will move some production back to Indiana — but Stellantis ordered layoffs.

The anticipated price hikes led to the team's second presumption: that new vehicle sales will decline by 1 million this year. Last month, Cox Automotive updated its forecast and predicted 700,000 fewer vehicles will be sold in the U.S. this year due to tariff volatility.

Anderson's team also assumed that many consumers who do buy new cars will trade down to less-expensive vehicles because of the higher prices on tariffed-vehicles as well as cautious spending due to losses taken on 401(k) accounts and other savings connected to recent stock market declines and volatility.

Finally, Anderson's team made the presumption that automakers will undertake significant efforts to adjust production, shift equipment and insulate consumers from much of the costs of the tariffs by absorbing at least half of the tariff costs in 2025, a presumption other experts have echoed.

"The best ballpark estimate I have seen is a $6,000 per vehicle increase overall," Art Wheaton, director of Labor Studies at Cornell University, told the Detroit Free Press. "I am sure that cost will be shared, so maybe $3,000 less profit and increase average of $3,000 on manufacturer's suggested retail price."

The 'damage' could continue into 2026

With all those assumptions in place, Anderson estimated the Detroit Three alone would experience a $5 billion reduction in operating earnings for North America for 2025.

Based on the UAW contract language in how profit-sharing is calculated, Anderson predicted a potential reduction of $1,000 to $5,000 per worker in their profit-sharing check for 2025. The reason for this wide range, Anderson said, is that some automakers are likely to be harder hit than others, the interpretation of the contract provisions regarding profits in the United States during the calendar year, and the company's policies for handling the tariff situation over the next year. 

"The profit-sharing distributions we estimated are for calendar year 2025, and the reductions in those reflect only the lost earnings during the remainder of 2025," Anderson said. "The damage would continue in 2026 if the tariffs remain in place, and the subsequent calendar year could be affected for the entire 12 months."

Bernstein autos analyst Daniel Roeska said he has done some math, but only on GM, on the tariff impact. He estimated GM’s North America adjusted earnings before interest and taxes could push go as low as $8.4 billion this year and $6.3 billion in 2026. Those compare to $14.9 billion for 2024. That reflects how much the profit-sharing and bonuses could decline at GM if his numbers ring true.

Morningstar Autos Analyst David Whiston declined to estimate how much profit-sharing for hourly workers or bonuses for salaried workers might be dinged at Ford and GM — the Detroit automakers he covers — because there are too many unknowns remaining. But he anticipates the hit to GM and Ford North American profits could be "massive." The hit to all three automakers could even exceed Anderson's $5 billion estimate, he said, noting that much of GM's profits alone come from the United States.

"I don’t think bonuses go to zero though," Whiston said in an email to the Free Press.

Whiston said he did an estimate on the impact tariffs could have on GM's North American profits a while back based on GM's 2024 United States' sales. He excluded vehicles that were discontinued and made assumptions on the cost-of-goods sold impact for United States versus those on non-U.S.-made vehicles.

"For GM, that comes to $12.7 billion, though you’d have to multiply by 75% since tariffs start in April (May for parts)," Whiston said. He cautioned that questions remain around, "how much of that increased cost actually hits GM’s profits versus elsewhere in the supply chain and consumers? No one knows yet."

Retirement accounts impacted

Even retirees aren't insulated from the fallout. Besides higher prices expected on most consumer goods, the declining stock market can impact 401(k) retirement funds and even traditional pensions.

In the case of pensions, the benefits would remain fixed so retirees would still get their same monthly allocation. But a volatile stock market can reduce a pension plan's level of funding, which could potentially mean that GM, Ford or any company has to shift money away from funding its operations into the pension fund to keep paying benefits. That's money that could have been invested in research and development.

Fain told NPR on Monday that he did not care about the decline of the stock market, stating, "Half of Americans don't even have stock."

NPR noted that some estimates said well over half of Americans own some stock. Gallup in 2023 found that proportion at 61%.

"Sixty percent of Americans have no retirement savings," Fain said. "So when I hear all the crying about the stock market, this is just Wall Street. They're people that are already rich, and at the end of the day, most working-class people are trying to survive right now. And it's infuriating that our livelihoods have been stripped from us for decades and no one's cared."

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But those UAW members hired after 2007 moved from traditional company-funded pensions to 401(k) retirement accounts. While most 401(k) accounts have a mix of investments, most are tied to the stock market and can experience gains and losses with market fluctuations.

When asked to comment on that fact, Fain said in an email, "You know whose 401(k) is suffering? The millions of workers who lost their jobs to plant closures and have no retirement savings because of it. You know who's not getting a profit-sharing check? The Mexican worker making $3 an hour to build a $100,000 vehicle."

Free Press staff writer Eric D. Lawrence contributed to this report.

Jamie L. LaReau is the senior autos writer who covers Ford Motor Co. for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @jlareauan. To sign up for our autos newsletter. Become a subscriber.