Workers at Ford's massive Rouge Complex were among UAW members who approved the contract concessions. (The Detroit News)
The United Auto Workers at Ford Motor Co. accepted concessions to their 2007 national labor contract aimed at saving billions for the struggling automaker, and now the clock is ticking for General Motors Corp. and Chrysler LLC to forge similar deals with their unionized hourly workers.
Fifty-nine percent of Ford's production workers and 58 percent of skilled-trades employees agreed to the changes, which protect their wages but suspend bonuses, alter work rules and essentially kill a controversial lay-off program called the jobs bank. The changes also allow Ford to finance part of a retiree health care trust with more stock and less cash than originally intended.
Both UAW and Ford leaders hailed the results of the ratification vote, which was announced Monday afternoon.
"Once again UAW members have stepped up to make the difficult decisions necessary to deal with the reality of the current economy," UAW President Ron Gettelfinger said in a statement posted on the union's Web site. Ford posted a record $14.6 billion loss in 2008 and industry conditions have worsened this year. Ford vehicle sales dropped 48.5 percent in February.
Joe Hinrichs, Ford's group vice president for global manufacturing and labor affairs, said the measures will help the Dearborn-based automaker "reach competitive parity with foreign-owned auto manufacturers." It also allows Ford to weather the economic crisis without loans from the U.S. government, he said.
Both Ford and UAW leaders urged members to pass the concessions to help the company keep afloat. U.S. vehicle sales have fallen 40 percent from the peak in 2007 and global sales have fallen 23.5 percent since January 2008.
While the Ford-UAW agreement is likely to be used as a pattern to negotiate with Chrysler and GM, which are still struggling to reach a deal with the union. Both Chrysler and GM have until March 31 to win givebacks from stakeholders, including the UAW and bondholders, under terms of $17.4 billion in emergency federal loans to the automakers. Ford isn't seeking government aid.
Ford also is in a stronger cash position than Chrysler and GM and the company last week offered bondholders cash and stock in a bid to retire $10.4 billion in debt, a move cash-starved GM likely cannot match.
The Ford agreement is still likely the pattern agreement that will be used by GM and Chrysler, said Harley Shaiken, labor professor at University of California, Berkeley, who closely follows the auto industry. A deal with the UAW is a requirement of the $17.4 billion the two automakers have received in federal aid and the additional $21.6 billion they've requested.
The deal approved by the UAW members at Ford doesn't cut base wages, health benefits or pensions, but workers will have to give up cost-of-living pay increases, as well as performance bonuses. The deal suspends the jobs bank, which pays workers even when they are laid off, but guarantees at least partial pay for up to two years for the highest seniority workers.
Additionally, hourly employees will work 40 hours before being paid overtime, which allows for four 10-hour days without overtime. Workers also will take shorter breaks.
The agreement also allows Ford to change the way skilled-trades work is performed at some plants. That is a significant concession, and one that could go a long way to closing the competitiveness gap with foreign automakers, said David Cole, chairman of the Center for Automotive Research.
A key measure also lets Ford cut by half its cash contribution to the retiree health care fund, called the Voluntary Employees' Beneficiary Association. Stock will make up the balance of payments to the fund, beginning in 2010 when $3.2 billion is due, according to a March 5 report by auto analyst Brian Johnson of Barclays Capital.