The United Auto Workers (UAW) union has reached a tentative contract agreement with Ford Motor Co, the last of the Big Three US automakers participating in a historic round of negotiations that has slashed wages and changed the way health care 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 US market share.
Tentative agreement on Ford's four-year contract was reached around 3:20am on Saturday without a strike. The UAW held short strikes against General Motors Corp and Chrysler LLC before reaching agreements with those automakers.
Details were not immediately released, but a person briefed on the deal said Ford scaled back plans to close some US 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 US$22 billion in retiree health care 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 US$12 billion last year. The company has mortgaged its assets -- including its blue oval logo -- to fund turnaround efforts and has been rapidly losing US market share, from 26 percent in the early 1990s to about 15 percent this year. It is using less than 80 percent of its US 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 cannot 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," he 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 Gettelfinger 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 in 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 had announced plans to shut down 16 factories in North America as part of a restructuring.
The company has identified only 10 of the closures. At least some of the remaining six are now slated to get new investment and avoid closure.
Going into this year's contract talks, US-based automakers said they had about a US$25-per-hour total labor cost gap, including wages and benefits, when compared with their Japanese rivals that have US factories.
The contract may face a tough ratification vote at Ford because of Chrysler's announcement less than a week after union ratification of its new contract, that it would lay off 8,500 to 10,000 workers at five North American assembly plants.
And shortly after GM's deal was ratified, that company announced it would cut shifts at three plants, affecting 1,700 jobs.
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