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.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 12 Comments
      JIM J
      • 9 Months Ago
      Sounds good, but the same folks holding the bonus checks are those pushing subs to cut costs. Continued pressure will force subs to provide components that fail sooner rather than later. I used to think it was the assembly line worker, but after touring a Ford truck plant it becomes obvious workers only have X amount of time to install a given part and if the part doesn't fit, or is of substandard quality the worker can't be blamed. For the company it's a balancing act between total expenses and making enough in the margin for the follow-on model, labor expenses, improved plant environment, price point, and so on. Like many things coming from the company board, it may fall short when implemented.
      waetherman
      • 9 Months Ago
      It's an interesting move, but I'm not sure it's necessarily an effective one. Increasing the bonus in years when quality is rated high may pervesely increase the incentive to cover up problems initially. As rlog cryptically suggests, the focus on the short-term is not corrected. Now if there were a pool of bonus money that was held in escrow for 5 years before being paid out, that might get people thinking a little longer term. That could be accomplished with, say, bonus shares that have a lock-in for a certain period or something. It's also interesting to note that behavioral economics suggests that linking "bonus" to quality actually doesn't do as much as linking actual salary. The bonus is just "gravy" that a person doesn't miss as much if they don't get it, because it was never an expectation in the first place. But if you include the bonus in the overall salary package and then subtract a portion if the quality ratings are low, and they will get much better results.
      charles
      • 9 Months Ago
      The Ford workers bonus would double if the egobust engines weren't a fiasco.
      turkeythundergod
      • 9 Months Ago
      The other issue is that outside of engineering/accounting failures, quality is directly tied to the hourly assembly workers' performance. So their bonuses need to be tied to it as well. All the same I think holding the people who make the decision that causes the quality iaaue is better. This is a great way to reduce bonuses though
        jtav2002
        • 9 Months Ago
        @turkeythundergod
        I don't think it's all tied to the assembly line workers. In the case of the current recall fiasco, you have a defective part. That's not the assembly workers fault. They install the components they're supplied with.
          mapoftazifosho
          • 9 Months Ago
          @jtav2002
          yeah, as more time goes by...you begin to see that pointing the finger at the assembly workers is just absurd. This was an issue of engineering being led by cost-cutters in accounting...
        The Other Bob
        • 9 Months Ago
        @turkeythundergod
        While an assembly worker could theoretically do a bad job, quality is tied to engineering. A person can assembly a poorly engineered part perfectly, but it is still a poorly engineered part.
      buckfeverjohnson
      • 9 Months Ago
      I think they should claw back bonuses from the people that oversaw the Company during Cobalt/Ion ignition design failures. There were long term incentives paid on bad results.
      Carboy45
      • 9 Months Ago
      t is amazing to me that these huge companies are even having this discussion. The methods and metrics for product quality improvement have been known and used for decades. While tying worker pay to quality scores may be helpful in some circumstances, most quality issues are the result of management decisions. Government Motors is notorious for using its customers as their final quality check on their cars. I remember them having a huge problem with automatic transmissions in the 70's or 80's. The latest ignition switch problem is a good example of poor engineering and bad management decisions. If a company is producing poor quality products it is simply a case of bad management.
      N.O.
      • 9 Months Ago
      Good, now hopefully those who go for a beer and Mary Jane brake will catch some flak from their co-workers.
        b.rn
        • 9 Months Ago
        @N.O.
        Those in those videos were likely not salaried (and likely exceptions).
      b.rn
      • 9 Months Ago
      I'm not sure the JD Powers, Consumer Reports, and Media Feedback are valid measurements for the engineers. Stick to warranty work and recalls, as measurements.