[The Big Three car companies have authorized $5 billion in stock
buybacks over the past year.]
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AUTOMAKERS HAND BILLIONS TO SHAREHOLDERS WHILE STIFFING WORKERS  
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Matthew Cunningham-Cook, Lucy Dean Stockton
September 12, 2023
The Lever
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_ The Big Three car companies have authorized $5 billion in stock
buybacks over the past year. _

United Auto Workers members walk in the Detroit Labor Day parade., AP
Photo / Paul Sancya

 

Roughly 150,000 auto workers are preparing to launch what may be the
biggest strike in decades this Thursday over their employers’
refusal to provide adequate pay and job security. Meanwhile, in the
past twelve months, the Big Three automakers — General Motors, Ford,
and Stellantis — have authorized $5 billion in stock buybacks,
effectively giving billions of dollars to shareholders that could have
gone to auto workers.

On top of the stock buybacks, the Big Three have reported $21 billion
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profits in just the first six months of 2023. Despite the enormous
gains, the companies have cried poverty in response to union demands
for wage increases to make up for decades of pay stagnation.

In a statement released
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month, General Motors (GM) claimed that the United Auto Workers’
(UAW) demands “would threaten our ability to do what’s right for
the long-term benefit of the team.”

As part of its efforts to force the auto companies to spend more on
their workers, the UAW has taken aim at the corporations’ stock
buyback approach, in which companies repurchase their shares to drive
up their short-term value. In their negotiations over a new contract,
which expires on Thursday, the union proposed automatic payments to
workers when the companies authorize buybacks or expand dividends. 

“Our union has also proposed an enhanced profit-sharing formula that
would provide workers $2 for every $1 million spent by Ford on stock
buybacks, special dividends, and increases to normal dividends,”
said UAW President Shawn Fain in a Facebook Live event
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this month. “Ford has responded with a concessionary proposal that
would change the profit-sharing formula so that workers would actually
earn less.”

COSTLY BUYBACKS

Last year, S&P 500 companies set records
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stock buybacks, spending over $923 billion — far outpacing the $565
billion the top firms spent on dividends, which are profit-sharing
payments made to shareholders. The U.S. government banned such stock
buybacks
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“market manipulation
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when President Ronald Reagan’s administration legalized them
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part of his deregulatory “Reagan Revolution.” These expenditures,
which artificially inflate value for shareholders, come at the cost of
long-term investments that ensure a company’s ability to exist,
including compensation for their workers. 

For the automakers, the latest buybacks reflect an even stronger
commitment to speculative payoffs for their shareholders. Ford spent
$484 million on buybacks last year, its biggest outlay
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2014. GM, meanwhile, re-launched its buyback program in September 2022
after a five-year hiatus
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billion expense, and has issued nearly $3.4 billion in buybacks in the
past 12 months. 

Stellantis — formed from the 2021 merger of Chrysler, Fiat, and
Peugeot — funneled $1.6 billion in stock buybacks to its
shareholders starting
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February. The most recent and final tranche of buybacks — totaling
$536 million — was announced
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just days before the impending strike.

The rise in stock buybacks and the decline of organized labor are
linked. William Lazonick, a University of Massachusetts economics
professor who has studied stock buybacks, traced GM’s reliance on
this sort of market manipulation to the company’s downfall amid the
2008 financial crisis. The company filed
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bankruptcy in 2009, in what was then the biggest manufacturing
collapse in U.S. history. 

“In the 1980s, when GM was still the biggest car company in the
world, it started buying back stock,” said Lazonick in an interview
with _The Lever_. “Between 1986 and 2002, it bought back about $20
billion worth of stock.”

In a 2015 _Harvard Business Review _analysis on the matter,
Lazonick calculated
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if GM had “saved that money and earned a modest 2.5 percent on it,
the company would have had $35 billion on hand when the financial
crisis and Great Recession hit and probably would not have had to file
for bankruptcy protection.”

Instead, because the companies were considered “too big to fail,”
the U.S. spent
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billion bailing out GM.

At the same time, the UAW agreed to
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billion
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labor cuts, 21,000 layoffs, a wage freeze for workers, a tiered wage
system for new workers, a no-strike agreement until 2015, and the
transfer of retirees’ healthcare and pension benefit costs from GM
to the UAW, in order to save GM $3 billion
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The union is still fighting to regain the ground they lost from these
concessions. 

In 1986, GM employed nearly 900,000 people — today, they have just
167,000 employees.

Effectively, Lazonick told _The Lever_, GM “distributed the
downsides to the labor force and distributed the cash to
shareholders.” 

In 1982, when stock buybacks were first legalized, the UAW had
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million members. The UAW currently has
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members.

The recent buyback spree comes on top of extraordinary dividend
payments made by the Big Three over the past year. 

Ford announced
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unprecedented $2.6 billion special dividend in February, on top of its
typical quarterly dividend of about $600 million. All told, this year
Ford has spent
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$4.3 billion on dividends. 

Stellantis has issued
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$4.1 billion in dividends this year, while GM is set
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distribute half a billion in dividends to its shareholders this year.

On average, the CEOs of the Big Three have received 40 percent bumps
in their salaries over the past four years. GM CEO Mary Barra made
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$29 million in 2022, Stellantis CEO Carlos Tavares made
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million, and Ford CEO Jim Farley made
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million. 

Lazonick argues that share repurchases, along with corporate
governance, should be a focus for labor unions moving forward. 

“They should be after more influence on how companies are allocating
resources, they should be going after board seats,” he said. “They
should be saying ‘no more’ to shareholder value.”

Fain’s recent statements line up with Lazonick’s
recommendations. 

“While the Big Three executives and shareholders got rich, UAW
members got left behind,”  Fain said in a video update
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last week. “A newly hired autoworker at the Big Three today makes
less than what they made in 2007. Meanwhile, car sales are down while
big profits are way up.”

_MATTHEW CUNNINGHAM-COOK covers labor, private equity, health care and
the retirement crisis. He previously worked at the International
Business Times and contributed to The Intercept._

_LUCY DEAN STOCKTON is a New York-based editor and reporter focused on
climate and privatization. She previously worked at The Nation, More
Perfect Union, and Insider._

_THE LEVER is a nonpartisan, reader-supported investigative news
outlet that holds accountable the people and corporations manipulating
the levers of power. The organization was founded in 2020 by David
Sirota, an award-winning journalist and Oscar-nominated writer who
served as the presidential campaign speechwriter for Bernie Sanders._

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