By Shawn Langlois
SAN FRANCISCO (Dow Jones) -- Ford Motor Co. shares rose 8%
Wednesday, gaining as the automaker said recent changes made in its
labor contract with the United Auto Workers will narrow the pay gap
enjoyed by foreign competitors and save $500 million or more a
year.
At last check, the shares traded up 14 cents at $1.99, building
on the prior session's rally that saw many double-digit percentage
gains across the auto sector. Ford shares closed with a 6.3% gain
Tuesday, but they remain down 13% since the beginning of the
year.
The deal with the union will mean bringing down hourly wages to
about $55 an hour, compared with the $48 an hour or so paid by
rivals such as Toyota Motor Corp. and Honda Motor Co. (HMC),
according to Joe Hinrichs, head of global manufacturing at Ford
(F).
"The modifications to the 2007 UAW-Ford contract are key
enablers to deliver our product-led transformation," he said during
a conference call. "The contract terms significantly improve our
competitiveness and help us to continue to pursue our restructuring
efforts."
Dearborn, Mich.-based Ford, which saw its car sales cut in half
last month, also is launching a buyout program in April for all
workers, though it won't be as generous as previous offers due to
the grim economy, Hinrichs said.
Under the modified agreement, cost-of-living adjustments and
bonuses will be reduced while production of the Ford Focus sedan
will be shut down at the Wayne, Mich., plant and will move next
door to the Michigan assembly plant.
As previously announced, the changes will enable Ford to make up
to half of its payments to the union health-care fund, which
amounts to $6.5 billion, in the form of common stock.
Rivals General Motors Corp. (GM) and Chrysler LLC are working
toward hammering out similar agreements with the union in order to
access more low-cost federal loans, but issues remain to be hashed
out with regard to the health-care fund.
GM and Chrysler face a March 31 deadline to convince the U.S.
government that they should receive up to $39 billion in loans.
Ford hasn't taken any such bridge loans.