As Ford Motor Co. enters discussions for additional United Auto Workers givebacks, the automaker will have to wait at least a year to hire its first lower-paid, two-tier workers.
Ford manufacturing chief Joe Hinrichs told Automotive News at the Detroit auto show Monday, January 12, that it will be 2010 before Ford can start to hire new workers at wages and benefits that are half of those paid veteran workers.
Current workers earn about $28 an hour.
Ford employs about 47,000 hourly workers covered by the contract.
Slow industry sales and the slumping economy are preventing Ford from availing itself of the new-hire provisions permitted in the 2007 UAW contracts with the Detroit Three, Hinrichs said.
Contractually, new hires paid at the lower-tier level can constitute up to 20 percent of Ford’s hourly workforce. But using current assumptions about an industry recovery, Ford estimates it will take “a few years” to get to that level, Hinrichs said.
As a provision of the recent federal $17.4 billion bailout package, General Motors and Chrysler have been ordered to bring their compensation in line with the Japanese transplants. Ford is looking to piggyback on any UAW labor changes to stay competitive with GM and Chrysler.
Hinrichs said Ford’s labor cost gap with the Japanese transplants is about $9 per hour in wages and benefits. Ford UAW workers earn all-in compensation of about $58 an hour versus $49 an hour for the Japanese transplants, he said.
Hinrichs said Ford is discussing the contracts with the UAW daily as GM and Chrysler seek to meet a February deadline to tell Congress how they will meet their loan requirements. Hinrichs said he met this weekend with UAW president Ron Gettelfinger.
Ford has not asked for federal loans, but the company has said it wants a $9 billion line of credit available from the government if vehicle sales deteriorate dramatically in 2009.
The tier-two provisions in the 2007 UAW contracts were meant to close the labor-cost gap. If Ford could get the maximum 20 percent of its UAW workforce on the second-tier wage, the company would trail the Japanese in labor costs by just $4 to $5 per hour, Hinrichs said. But getting to that level will take years, he said. U.S. vehicle production in 2009 is expected to drop 25 to 30 percent against an already depressed 2008.
Hinrichs declined to discuss its negotiating strategy with the UAW. But he did say that one potential area of cost savings is in skilled trades.
In 2006 and 2007, local plant-operating agreements with the UAW cut skilled-trade classifications from more than 100 to the low 20s, Hinrichs said. But there could be additional changes on that front to cut costs and improve manufacturing flexibility, he said.
Hinrichs said it has yet to be determined whether Ford will offer additional hourly buyouts and retirement incentives. He said production cuts have given Ford a temporary surplus of workers. But Ford wants to avoid paying up to $140,000 in cash for workers to leave, only to have to hire workers in an uptick, he said.
During 2008, Ford offered two hourly buyouts. Hinrichs said 7,000 workers took the buyouts.