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Ford to Add, Retain 12,000 Jobs With New UAW Agreement

The automaker plans to insource manufacturing work from Mexico, Japan and China. The 12,000 new or retained jobs include 5,000 previously announced positions, Ford said.

October 4, 2011
Related Topics: Labor Trends, HR/Workforce Trends, Pension Reform, Payroll, Health Care Costs, Compensation Design and Communication, Wages and Hours, Workforce Planning, Compensation, Benefits, Legal, Latest News
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Ford Motor Co. said it will add or retain 12,000 U.S. jobs as part of $16 billion in planned investments under its new labor agreement with the United Auto Workers.

The automaker and UAW reached a tentative accord Oct. 4 covering wages and benefits for 41,000 workers.

The automaker plans to insource manufacturing work from Mexico, Japan and China. The 12,000 new or retained jobs include 5,000 previously announced positions, Ford said.

"This agreement ensures that the members will benefit now that the company is doing well," said Jimmy Settles, head of the UAW's bargaining at Ford in a statement. "UAW members sacrificed when the company was struggling and now will share in Ford's prosperity."

Analysts expect the Ford agreement to be similar to an earlier deal with General Motors.

It's unclear if and how much Ford sweetened economic terms to win ratification from restless Ford workers.

Ford entered the talks aiming to reduce its labor costs, which are the highest in the industry, and gain more parity with GM and Chrysler Group.

The Center for Automotive Research in Ann Arbor, Michigan, estimates Ford's hourly labor costs—wages and benefits—averaged $58 in 2010, compared with $56 at GM and $49 at Chrysler.

Kristen Dziczek, director of labor and industry studies at the institute, said Ford's labor costs are higher because of bigger profit-sharing payouts in recent years. Ford also clocked fewer hours worked in 2010 because several assembly plants were down for model changeovers and retooling, though workers still collect a portion of pay and benefits based on seniority and length of temporary layoff.

Ford also has far fewer workers than GM or Chrysler that earn lower, entry-level wages compared to veteran UAW employees.

"Not only does Ford have fewer entry-level workers, they pay them more," said Dziczek, referring to 2009 concessions that permitted GM and Chrysler to freeze Tier 2 wages.

GM agreed to raise wages for entry-level workers under a new pact that was ratified this week by a 2-to-1 margin.

Veteran UAW members earn about $28 an hour, excluding benefits, while newly hired workers earn $14 to $16 an hour. Under GM's new pact, Tier 2 workers will earn up to $19.28 an hour by 2013.

Ford also sought greater flexibility to deploy skilled trade workers. In addition, Ford hoped to rein in future health care costs and minimize catastrophic insurance payouts by encouraging more screening and early detection.

The union is using the 2011 negotiations to reverse steep job losses at Detroit's automakers and recover concessions valued at $7,000 to $30,000 per worker since the 2007 contract.

Ford's UAW ranks have dropped 61 percent from a recent peak of 102,462 in 2000 to about 41,000 today. The decrease in hourly workers has allowed Ford to cut its hourly payroll costs 57 percent from $6.7 billion in 2000 to $2.9 billion last year.

With the GM deal, the union traded generous wages and benefits for new jobs, employment security and gains in compensation that will be tied closer to profits and the health of the company.

The union says GM will retain or create at least 6,400 jobs over the next four years under the contract.

GM also agreed to provide a $5,000 signing bonus, a $1,000 lump sum payment in each of the last three years of the deal, and raise wages for entry-level workers.

The GM deal also includes an enhanced profit-sharing plan.

Based on GM's profits so far in 2011, the union says workers will receive at least $11,500 in guaranteed economic benefits under the pact. If annual quality targets are achieved, the figure could climb to $12,500. It could also increase based on GM's future profits in North America.

Under the GM pact, 10 percent of hourly profit-sharing payouts will be withheld and contributed to a health care trust that covers UAW hourly retirees. The contributions must still be approved by regulators.

GM said the deal will raise its annual labor costs by $215 million—or about 1 percent annually—the smallest increase in four decades when the 2007 and 2009 accords are excluded.

GM will see the biggest savings from a freeze on hourly pension benefits, elimination of free legal services, a voluntary buyout program for skilled trades workers, and greater use of lower-paid workers. Those savings will be offset by a higher ratification bonus and lump sum payments to cover inflation, and an increase in Tier 2 wages, profit sharing payouts and layoff provisions, GM told Wall Street analysts this week.

The union—facing perhaps the most delicate talks with Ford—planned to focus on the No. 2 automaker last. But when talks with Chrysler hit a roadblock following the GM settlement, the union turned its attention to Ford.

The Ford negotiations proved tricky for a number of reasons.

After posting combined losses of $30 billion from 2006 through 2008, Ford swung to a profit of $2.7 billion in 2009 and $6.6 billion last year. That's the primary reason Ford workers have high expectations UAW leaders delivered a pact that is more generous than the GM deal. While accepting some concessions in early 2009 as Detroit's 3 automakers teetered, Ford workers—overruling UAW leaders—rejected a second round of givebacks negotiated and secured later that year by GM and Chrysler as part of their government-backed bankruptcies.

Those concessions included the freeze on Tier 2 wages, greater leeway to use skilled trade workers and a no-strike clause and binding arbitration in the event union and management reach an impasse over economic matters through 2015.

The union also has a grievance pending against Ford that claims the automaker failed to treat hourly and salaried workers equally when it reinstated merit raises, tuition assistance and 401(k) matches to white-collar employees.

Ford's tuition assistance program for salaried employees was reinstated on March 1, 2010, and the company's match for salaried 401(k) plans resumed on Jan. 1, 2010.

Merit pay increases were awarded to eligible salaried employees in 2010 and 2008, Ford spokeswoman Marcey Evans said.

The union has also been openly critical of Ford CEO Alan Mulally's 2010 compensation.

Ford awarded Mulally compensation for last year of $26.5 million, generating resentment among many Ford workers. And UAW President Bob King has called the payout "morally wrong."

 

Philip Nussel of Automotive News contributed to this report.

 

David Phillips writes for Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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