October 4, 2011 – By Bernie Woodall and Ben Klayman
Continue Reading Below
DETROIT (Reuters) - Ford Motor Co and the United Auto Workers union said on Tuesday they had reached a tentative four-year contract that would allow the automaker to invest almost $5 billion in U.S. plants and create an additional 5,750 jobs.
Ford declined to comment in detail on how the agreement would affect fixed costs, but said the proposed contract would allow it to bring work to the United States from Mexico, China and Japan.
The union council representing Ford plants voted overwhelmingly to approve the deal, UAW Ford negotiators said in an online posting. (www.uaw.org) The tentative contract must now be ratified by 41,000 workers represented by the UAW.
Ford shares were up 3.1 percent at $9.66 on Tuesday afternoon after falling to a two-year low earlier in the session.
"The UAW and Ford negotiated a contract that helps the company keep their fixed costs and product prices competitive, while providing substantially increased profit-sharing to workers," Jimmy Settles, the UAW vice president in charge of the Ford talks, said in a statement.
Continue Reading Below
Ford said on Tuesday it will create or preserve 12,000 U.S. hourly jobs by 2015 if the deal is ratified.
That total includes 7,000 jobs previously announced by Ford, including 750 white-collar positions. The majority of the additional 5,750 jobs to be added will be at entry-level wages, the company said.
The UAW said separately that many of the new jobs would be added by the end of 2012.
Six percent of Ford's hourly workers earn entry-level wages, which average just under $17 an hour. Traditional nonskilled UAW workers at Ford earn an average of just over $28.
While the number of new jobs announced was slightly less than what was agreed to by General Motors Co, the Ford contract represents a good deal in a bad economy for the union, said Harley Shaiken, a labor expert at the University of California, Berkeley.
"That's more jobs than the whole country created in August," said Shaiken, who also is a confidant of UAW President Bob King. "It's a significant deal in an iconic industry.
Ford can afford to add those jobs because it will help bring down the average cost of overall hourly compensation, said Kristin Dziczek, a labor analyst at the Center for Automotive Research.
If Ford could match the ratio of entry-level workers at Chrysler -- bringing the share to 12 percent from 6 percent -- it would cut average hourly compensation costs by $4 to $54, she said.
Ford pledged that if the contract is ratified it would invest $16 billion in the United States, including $6.2 billion in its own plants. Of that latter amount, almost $5 billion had not been previously announced, Fleming said.
The union had previously negotiated a deal with General Motors Co that was expected to provide a rough blueprint for the deal at Ford.
Unlike GM and Chrysler, Ford did not undergo a federally funded bankruptcy and bailout in 2009, and Ford's hourly workers have said they expected a richer deal than one ratified last week for 48,500 GM workers.
Credit ratings agency Standard & Poor's said last week that it could raise Ford's credit rating if a new labor deal with the UAW allowed the automaker to remain "solidly profitable" in its home market and kept it competitive with GM.
Union-represented workers at GM, who have not had a base pay increase since 2003, approved a deal that will create or save more than 6,000 U.S. factory jobs, raise wages for entry-level employees, and pay each worker at least $11,500 in bonuses over the four-year life of the pact.
GM said the pact would have minimal impact on profits.
The Ford deal will also include profit-sharing bonuses for workers although the details of those payouts have not been announced.
PRESSURE ON CHRYSLER
Ford executives declined to discuss the grievance its UAW workers filed against the automaker, but analysts and industry observers expected it to be part of any deal. The grievance says Ford gave pay increases to its salaried workers, but not similar increases to its hourly work force.
A ratified contract at Ford will allow the UAW to focus on Chrysler Group LLC, the weakest of Detroit's three automakers and where analysts expect negotiations to be tougher.
Chrysler, majority-owned by Italian automaker Fiat SpA, has about 23,500 UAW-represented workers. Sergio Marchionne, chief executive of both Chrysler and Fiat, is under pressure to hold the line on costs, and a deal at Chrysler may be the most difficult for the UAW, analysts say.
The pressure on Chrysler to get its deal done will now increase, said Shaiken, who does not expect the sides to resort to arbitration to settle their differences.
"The common interests will trump the personal differences," he said. "With two other contracts signed and ratified, Chrysler is going to be hard-pressed to demand a different road."