UAW and Ford reach tentative agreement
Changes made in retiree healthcare
DETROIT - The United Auto Workers union reached a tentative contract agreement yesterday with the last of the Big Three automakers, Ford Motor Co., concluding a historic round of negotiations that has slashed wages and changed the way healthcare is provided to retirees.
Ford said the deal, if approved by the approximately 54,000 workers affected, will make it more competitive as it tries to halt its sliding US market share.
Tentative agreement on Ford's four-year contract was reached around 3:20 a.m. EDT without a strike. The UAW held short strikes against General Motors Corp. and Chrysler LLC before reaching agreements with those automakers.
Details were not immediately released, but a person briefed on the deal said Ford scaled back plans to close some US plants and has promised to make significant product investments to ensure those plants will remain open for now. The person requested anonymity because the union hadn't released details.
In exchange, Ford will be allowed to pay lower wages to thousands of new hires, a provision already agreed to in contracts with GM and Chrysler.
Ford said the deal allows it to move its estimated $22 billion in retiree healthcare obligations to a union-run trust. The company didn't say how much it will have to contribute to the trust. GM and Chrysler have similar agreements in their contracts.
Ford is financially the weakest of the Detroit Three automakers, having lost more than $12 billion last year. The company has mortgaged its assets - including its blue oval logo - to fund turnaround efforts and has been rapidly losing US market share, from 26 percent in the early 1990s to about 15 percent this year. It is using less than 80 percent of its US plant capacity.
Erich Merkle, vice president of auto industry forecasting for the consulting firm IRN Inc., said the amount Ford must contribute to the healthcare trust and the number of workers who will make lower wages are going to be key to determining whether the contract is enough to help Ford.
Merkle said even if Ford keeps plants open, it may cut shifts, as GM and Chrysler have done. Ford can't price vehicles competitively if it's paying too many workers and keeping too many plants open, he said.
The UAW's chief Ford negotiator, Bob King, said the union made progress in each of its three goals: winning new product and investment, getting job security, and protecting seniority rights.
"We face enormous challenges - and we also have enormous potential," King said in a statement.
Ford already had announced plans to shut down 16 North American factories as part of a restructuring. The company has identified only 10 of the closures. At least some of the remaining six are now slated to get new investment and avoid closure.
Ford also was expected to try to reduce its US hourly work force by 13,000 employees through buyout and early retirement programs, but it wasn't clear if that plan was part of the contract. GM and Chrysler included buyouts in their contracts. Ford is expected to announce this coming week that more than 30,000 hourly workers have taken previous buyout offers.
If more workers leave, some of them could be replaced by so-called "noncore" employees who would be paid on a lower wage scale, starting around $14 per hour. An average Ford hourly worker made $28.88 per hour in 2006, according to the company.
Going into this year's contract talks, US-based automakers said they had about a $25-per-hour total labor cost gap, including wages and benefits, when compared with their Japanese rivals that have US factories.
The contract may face a tough ratification vote at Ford because of Chrysler's announcement Thursday, less than a week after union ratification of its new four-year contract, that it would lay off 8,500 to 10,000 hourly workers and eliminate shifts at five North American assembly plants.
And shortly after GM's deal was ratified, that company announced it would cut shifts at three plants, affecting 1,700 jobs.
"My concern is if it's a similar agreement negotiated at GM and Chrysler, then it's terrible for the workers and the future," said Gary Walkowicz, a worker and former local union official at a Ford truck plant in Dearborn.