2nd UPDATE: Ford Says UAW Pact Closes Wage Gap With Rivals
11 März 2009 - 8:56PM
Dow Jones News
Ford Motor Co. (F) will lower labor costs and expects to close
the wage gap with its foreign rivals in two years, according to
details of its new union deal released Wednesday.
The deal - which saves the company $500 million annually and
trims the benefits in worker pay packages - intensifies the
pressure on General Motors Corp. (GM) and Chrysler LLC. The two
auto makers need concessions from the United Auto Workers union to
secure more U.S. government low-interest loans.
GM is expected to get many of the same concessions as Ford
although some of the labor deal will be different, according to a
March 9 UAW letter obtained by Dow Jones Newswires. UAW Vice
President Cal Rapson didn't provide specifics in the letter.
Chrysler and GM aren't commenting on their UAW negotiations.
The other two auto makers and the UAW remain at odds over
retiree health-care funding.
The UAW ratified the Ford pact on Monday. Ford, which hasn't
accessed federal low-interest loans, is staying ahead of GM and
Chrysler by making a variety of moves. It has sold off brands, cut
Chief Executive Alan Mulally's salary by 30% and announced plans to
retire as much as $10.4 billion in debt.
"Ford is trying to set the pace by structuring deals that work
for them," said Morgan Keegan analyst Pete Hastings. "Massive union
concessions, among other things, are required for survival. The
alternatives are a government-mandated solution or breaking the
union in bankruptcy court."
Ford said its total compensation package for hourly workers -
which includes benefits, pensions and bonuses - will fall to about
$55 an hour from $60. This compares with the $48 paid by overseas
auto makers operating in the U.S., Ford's group vice president of
global manufacturing Joe Hinrichs told reporters. The reduction
takes effect March 16.
"This gets us into the ballpark where the transplants are,"
Hinrichs said, referring to the U.S. operations of foreign rivals
such as Nissan Motor Co. (NSANY) and Toyota Motor Corp. (TM).
"Within the next couple of years, with the buyouts and with the
ability to leverage some of the other tools in this agreement, we
get parity with" companies like Toyota and Nissan, Hinrichs
added.
The gap is expected to close when Ford's other cost reductions -
such as new hires receiving a total compensation of $30 an hour -
take hold and foreign auto makers' wages increase, as they fight to
remain competitive.
Buyouts And Consolidation
As part of its accord, Ford will introduce a series of
companywide buyouts of its hourly workers on Apr. 1, running
through May 22.
The offers will be lower than previous programs because of the
economy, Hinrichs said. There will be lump-sum payments for
voluntary departure and early retirement. A third option will be
some type of tuition assistance. Details will be released next
month.
Ford's deal with the UAW will also lower costs and improve
liquidity by allowing it to use stock to fund half of its
contribution to the Voluntary Employee Beneficiary Association, a
union-run health-care fund.
The auto maker is expected to save $375 million this year from
the contract changes covering about 42,000 union workers, rising to
$500 million or more in subsequent years.
While Ford isn't seeking access to the low-interest loans
provided by the U.S. Department of Treasury, a $14.7 billion loss
last year and a weak global auto market have seen it push for
concessions similar to those being pursued by GM and Chrysler.
Its two rivals need the concessions from the UAW - and other
stakeholders - by March 31 to be eligible for the $16.6 billion and
$5 billion in loans they are seeking, respectively.
Hinrichs also confirmed that Ford will end production at its
Wayne, Mich., plant, which builds the Ford Focus.
Focus production will be moved to a Michigan assembly plant that
is being retooled to produce smaller vehicles. The plant had
assembled the Ford Expedition and Lincoln Navigator sport-utility
vehicles. The move won't result in any job losses.
Ford said last year that it was converting the plant in an
effort to produce more small cars in the U.S. as consumers moved
away from buying SUVs and pickup trucks.
Its shares recently rose 9 cents, or 4.7%, at $1.94. GM shares
fell 5 cents to $1.84.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542;
jeff.bennett@dowjones.com
(Sharon Terlep contributed to this story.)