Ford, UAW agree on contract with bonuses

DETROIT Wed Oct 5, 2011 8:37am IST

The Ford Motor Company logo is shown during the firm's annual meeting of shareholders in Wilmington, Delaware May 12, 2011. REUTERS/Tim Shaffer/Files

The Ford Motor Company logo is shown during the firm's annual meeting of shareholders in Wilmington, Delaware May 12, 2011.

Credit: Reuters/Tim Shaffer/Files

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DETROIT (Reuters) - Ford Motor Co agreed to invest more than $6 billion in U.S. plants, add another 5,750 jobs and pay bigger bonuses than General Motors Co in a new contract with the United Auto Workers union on Tuesday.

Ford said the four-year contract for 41,000 factory workers would keep it cost-competitive with rivals, and analysts said it could clear the way for a credit upgrade that would bring down borrowing costs for the No. 2 U.S. automaker.

The UAW, meanwhile, won new job promises and a pledge by Ford to bring work back to the United States from Mexico, China and Japan.

Completing the Ford deal also allows UAW President Bob King to focus on rockier negotiations at Chrysler Group LLC, the weakest of Detroit's three automakers.

"We are at one of those inflection points, it feels like, in the economic cycle where no one could really press the other side for the nuclear option," said Jefferies & Co analyst Peter Nesvold.

UAW workers at Ford will receive at least $16,000 in bonuses over the contract, which includes early retirement offers for veteran workers and plans to shift some assembly work from Mexico.

Ford declined to comment in detail on how the tentative agreement would affect fixed costs. "We're very pleased that it will improve our competitiveness here in the United States," John Fleming, Ford's head of global manufacturing, told reporters.

GM previously said its UAW deal would have minimal impact on profits.

The union council representing Ford plants voted overwhelmingly to approve the deal, and it must now be ratified by UAW-represented workers, something union officials expect by Oct. 17.

Ford shares closed up almost 7.6 percent at $10.08 on Tuesday amid a rally in the broad market.

Under the UAW contract, Ford said it would create or preserve 12,000 U.S. hourly jobs by 2015 if the deal is ratified. That includes 7,000 jobs previously announced by Ford. The majority of the additional 5,750 jobs to be added will be at entry-level wages.

Six percent of Ford's hourly workers earn entry-level wages, which start at $15.50 and average just under $17 an hour. Traditional nonskilled UAW workers at Ford earn an average of just over $28.

By comparison, the average U.S. manufacturing worker makes about $16 per hour.


While the number of new jobs announced was slightly less than the more than 6,000 agreed to by GM, the Ford contract represents a good deal in a bad economy, said Harley Shaiken, a labor expert at the University of California, Berkeley.

"That's more jobs than the whole country created in August," said Shaiken, who also is a confidant of the UAW's King. "It's a significant deal in an iconic industry.

Ford can afford to add jobs at the lower, entry-level wage level because it will help bring down the average cost of overall hourly compensation, said Kristin Dziczek, a labor analyst at the Center for Automotive Research.

If Ford could match the ratio of entry-level workers at Chrysler -- bringing the share to 12 percent from 6 percent -- it would cut average hourly compensation costs by $4 to $54, she said. UAW officials said the deal will make Ford competitive with the U.S. plants owned by foreign automakers.

Ford pledged that if the contract is ratified it would invest $16 billion in the United States, including $6.2 billion in its own plants. Of that investment in its plants, almost $5 billion had not been previously allocated, Ford said.

The remainder or just over $1 billion had been allocated by Ford planners but not announced, the company said.

Unlike GM and Chrysler, Ford did not undergo a federally funded bankruptcy and bailout in 2009, and Ford's hourly workers have said they expected a richer deal than one ratified last week for 48,500 GM workers.

The Ford deal includes at least $16,000 in bonuses over four years, more lucrative than the $11,500 minimum GM workers will receive over the life of their deal.

Art Schwartz, a labor consultant and former GM executive, said the additional bonus payouts would cost Ford about $160 million more compared with GM. "They want the contract ratified to get on with making money," he said.

Ford also pledged to shift some assembly of the Ford Fusion sedan to its plant in Flat Rock, Michigan, from Mexico, and add a second shift of workers at the U.S. factory.

In addition, Ford assembly plants in Chicago, Kansas City, Louisville, and suburban Detroit will add shifts or get new investment to build new vehicles.

Credit ratings agency Standard & Poor's said last week that it could raise Ford's credit rating if a new labor deal with the UAW allowed the automaker to remain "solidly profitable" in its home market and kept it competitive with GM.

A grievance filed by UAW workers against Ford was not a part of the proposed agreement, but a settlement was expected "some time in November," UAW Vice President Jimmy Settles said.

The grievance, which has gone to arbitration, said Ford acted improperly by giving pay increases to its salaried workers but not similar increases to its hourly work force.

Ford workers retain the right to strike, unlike those at GM and Chrysler, both of which were put through federally funded bankruptcies.

The Ford contract has been widely expected to face a tougher ratification vote than the one at GM, in part because of the higher expectations of Ford workers.

Gary Walkowicz, a union official representing the Dearborn Truck Plant, said he will attempt to lead a campaign to have the proposed contract voted down.

"We were told we needed to help the companies out when times are bad, and, when things turn better, you'll get them back," he said. "Well, things are better for the companies, and we're not getting (the concessions) back."

(Reporting by Ben Klayman, Bernie Woodall, Deepa Seetharaman and Kevin Krolicki; editing by John Wallace and Matthew Lewis)


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