The poor first quarter earnings of Ford and General Motors are having an effect all the way up the food chain. Both automakers struggled with recalls in the first three months of the year, and, according to The Detroit News, they have responded by increasing the percentage of bonuses tied to vehicle quality for salaried workers, including top executives.
GM announced that 25 percent of bonuses (up from 10 percent) for all salaried workers would be tied to its vehicle quality standards. The automaker revealed in its financial report that it spent $1.3 billion on recall-related repairs in the first quarter, and net income was down 86 percent.
Ford also increased the quality proportion of bonuses for about 26,000 salaried workers all the way up to CEO Alan Mulally from 10 percent to 20 percent. The company announced in its report that the amount paid out in warranty and recall claims was about $400 million higher than expected in the first quarter. Its net income fell 39 percent from the previous year. "The change reflects how critical quality is to our overall business," said spokesperson Todd Nissen speaking to Autoblog.
The automakers use a wide variety of metrics to determine vehicle quality. "Management lease vehicle surveys, JD Power, Consumer Reports, assembly plant quality, warranty claims, media feedback, etc. How they decide to group that all together is another story," explained Dave Sullivan of AutoPacific to Autoblog in an email. Clearly, the companies hope that tying quality to workers' bank accounts helps put an end to all of these recalls. If problems are identified sooner, it saves the business money on the long run. Autoblog reached out to both Ford and GM to get a better understanding of why they made these decisions. If they reply, we will update this story.