Ford Motor Co. on Monday informed salaried employees of changes to bonus awards following outcry from some workers who felt the payout was unfair.
At issue are bonuses for lower-level salaried employees, whom the company refers to as general salary role, or GSR, and their direct supervisors, known as LL6 employees. Those employees recently were notified they’d be awarded 54% of their bonus targets for 2021, based on the company’s results in North America. Meanwhile, higher-level employees — whose bonuses are based on global results — would receive 135% of their targets. Adding fuel to employees’ ire, General Motors Co. recently notified its salaried workers they’d get 200% of their bonus targets.
Amid the backlash, Ford executives huddled over the weekend and decided to double awards for those who were slated to get 54% of their targets, while senior executives would take a reduced amount. The news first was reported Monday by the Detroit Free Press.
Ford spokesperson Said Deep said employees were made aware of the payout amounts last week, and the topic was raised during a regularly scheduled meeting that Kumar Galhotra, Ford’s president of the Americas & International Markets Group, hosted with employees on Thursday. Many employees posed questions about bonuses, prompting Galhotra to send a letter to employees and executives to discuss the issue over the weekend. Employees were notified of the change Monday via another note from Galhotra.
“Plain and simple, we did not achieve our original automotive performance targets,” he wrote. “However, we realize the formula for which we arrived at the AICP (annual incentive compensation plan) awards doesn’t fully consider the unusual events that affected our business, such as the global microchip shortage and a continued pandemic.”
As such, he said, the company would reduce its bonuses for company officers from 135% of their target to 108%. The changes would apply to Galhotra, CEO Jim Farley, Executive Chair Bill Ford Jr. and other senior leaders.
Meanwhile, the company will double bonuses for lower-level employees, from 54% of their target to 108%. Employees who fall within mid-level job classifications will keep the 135% payout.
“We realize these changes will not satisfy everyone,” Galhotra acknowledged. “But we agreed in this current business climate this change is the right thing — the fair thing — to do.”
In the letter, Galhotra explained that bonuses for all salaried employees in North America previously were based on the company’s global performance. But the company changed bonus formulas for some to be based on results in North America after some employees in the region indicated they’d rather their incentives were tied more directly to their work. The new formula was used for the first time in 2020, but the company made adjustments to make up for the impact of the pandemic.
Mid-level employees and above, including corporate officers, continue to use a formula based on global results.
The Free Press, citing documents it obtained, reported that formulas for performance bonus payouts ranged from 72% to 113% between 2016-2019 before dipping to 54% in 2020 and 50% in 2021.
A salaried Ford employee who works in product engineering design and is not authorized to speak to the media told The Detroit News the announcement of the 54% payout prompted anger among some employees. The reaction, the employee said, was based in part on the fact that Ford posted strong profits in 2021 and was exacerbated after staffers learned of the payout rate for higher-level employees.
Ford posted $17.9 million in profit on revenue of $136.3 billion last year. In North America, the automaker reported earnings before interest and taxes of nearly $7.4 billion on revenue of $87.8 billion, though bonuses are based on numerous factors. The Free Press reported that automotive free cash flow in North America is a major factor, and that the company came in below target on that metric.
And, the employee said, some talked of leaving the company after hearing about GM’s 200% payout. GM confirmed the accuracy of that performance factor: “We had strong performance in 2021, and with our global variable pay incentive program for GM salaried employees and hourly profit sharing, when GM wins, all of our team members win,” GM spokesperson Pat Morrissey said in a statement.
The issue at Ford came to a head during a virtual all-hands meeting last week, where employees used the meeting’s chat function to voice their complaints. The employee who spoke to The News said newer hires expressed frustration about the payout because they said Ford had used bonuses as a selling point in persuading them to work there.
“We set business targets for 2021 with the assumption that the pandemic would ease, and the supply of microchips would improve. Neither occurred,” Galhotra wrote. “Our automotive business missed its business plan targets, while Ford’s overall global performance was above target resulting in the AICP percentages communicated last week.”
Going forward, he said, the company will “continue to refine” its process for awarding bonuses. The topic will be discussed at an upcoming company meeting.
Bonuses are scheduled to be paid out in March. Most of Ford’s 56,000 hourly employees in the United States will receive up to $7,377 in profit-sharing. At GM, about 42,500 U.S. hourly workers will receive up to $10,250 in profit-sharing.
