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.)