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Ford, UAW reach tentative pact

The deal apparently would lower wages for new hires and put the union in charge of retirees' healthcare.

November 04, 2007|From the Associated Press

DETROIT — The United Auto Workers union reached a tentative contract agreement Saturday with Ford Motor Co., the last of the Big Three automakers participating in 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 a majority of the approximately 54,000 workers represented, will make it more competitive as it tries to halt its sliding U.S. market share.

Tentative agreement on Ford's four-year contract was reached around 3:20 a.m. without a strike. The UAW held short strikes against General Motors Corp. and Chrysler LLC before reaching agreements with them.

Details were not immediately released, but a person briefed on the deal said Ford scaled back plans to close some U.S. 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 had not 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 did not say how much it will have to contribute to the trust. GM and Chrysler have similar agreements in their contracts.

"Though we will not discuss the specifics of the tentative agreement until after it becomes final, we believe it is fair to our employees and retirees, and paves the way for Ford to increase its competitiveness in the United States," Joe Laymon, Ford's group vice president for human resources and labor affairs, said in a statement.

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 U.S. market share, from 26% in the early 1990s to about 15% this year. It is using less than 80% of its U.S. 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 that even if Ford keeps plants open, it may cut shifts, as GM and Chrysler have done. Ford can't price vehicles competitively if it is paying too many workers and keeping too many plants open, he said.

"They're just delaying the inevitable, and the inevitable is they need to reduce capacity," Merkle said. "The market's so competitive. As long as we have this excess capacity situation, there isn't going to be any pricing power."

UAW President Ron Gettel- finger said in a statement that the deal encourages Ford to invest in its products while addressing the economic needs of union members. The UAW's chief Ford negotiator, Bob King, said the union made progress on 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 was expected to try to reduce its U.S. hourly work force by 13,000 employees through buyouts and early-retirement programs, but it wasn't clear if that plan was part of the contract.

If more workers leave, some 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.

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