Ford-UAW Deal: 12,000 More Jobs, $16B Investment

Tuesday, 04 Oct 2011 11:26 AM

 

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 Ford Motor Co. said it has committed to add 12,000 hourly jobs in its U.S. manufacturing plants by 2015 as part of a four-year tentative agreement with the United Auto Workers.

The figure includes 5,750 more UAW jobs than a previously announced 6,250 hourly positions to be added by the end of 2012, Executive Vice President John Fleming said at a news conference in Dearborn, Michigan. Ford will be “in-sourcing” jobs from Mexico, China and Japan, the company said in a statement. The union said it will release details later today.

The agreement is subject to a ratification vote by Ford’s 41,000 U.S. hourly workers. General Motors Co. workers approved a new contract, the union said Sept. 28. The UAW said it’s still negotiating with Chrysler Group LLC, which has extended the deadline to reach a deal to Oct. 19.

“Ford wanted an agreement that gave them parity with GM and Chrysler,” said Kristin Dziczek, a labor analyst with the Center for Automotive Research in Ann Arbor, Michigan. “This is still a pretty sluggish recovery. Ford is doing financially well now, but fortunes change very quickly in this industry.”

The UAW is negotiating contracts for 113,000 workers at U.S. automakers for the first time since GM and Chrysler went bankrupt in 2009. Workers at Ford, the only company to avoid Chapter 11, have said they are seeking more from the automaker they helped save. Only Ford workers can go on strike in these negotiations because GM and Chrysler employees agreed not to walk out as part of their U.S.-backed reorganizations.

Credit Rating

“This agreement recognizes that Ford would not have turned the corner had it not been for the commitment and dedication of its workers,” Jimmy Settles, the UAW vice president who oversees the union’s Ford department, said in an e-mailed statement.

Standard & Poor’s Ratings Services may raise Ford’s debt ratings, depending on details of its UAW agreement. Ford’s corporate credit rating is now BB-. It may be upgraded to BB+, the highest non-investment grade, if the labor accord is ratified and it “does not place Ford at a significant disadvantage” to GM, the ratings company said Sept. 29. S&P raised GM to BB+ from BB- because of its new contract.

The majority of the 12,000 jobs Ford is adding will be workers making entry-level wages, said Marcey Evans, a Ford spokeswoman. Wages for those so-called Tier-2 workers have started at about $14 an hour, half of what senior workers make. Ford has said it has fewer than 100 UAW-represented workers receiving the lower wage rate.

Labor Costs

“It’s our opportunity for bringing in new people,” said Fleming, Ford’s manufacturing and labor chief. The jobs “will help us with our overall labor costs by hiring in Tier-2 people.”

Ford had discussed adding as many as 10,000 jobs in the U.S. as part of the talks, according to three people familiar with the negotiations. As many as 4,000 of those jobs would be related to making the Fusion midsize sedan, which is currently made in Hermosillo, Mexico, in the U.S., one of the people has said.

“One of the areas we really concentrated on was jobs,” said Marty Mulloy, Ford’s vice president of labor affairs, who added that bargainers for both sides worked through the night to complete details on the new hires.

Ford said it pledged to invest $16 billion in the U.S., including $6.2 billion for its plants in the country. Of the amount going to U.S. factories, $1.4 billion was previously announced for assembly plants in Missouri and Kentucky, and two factories that make batteries and transmissions in Michigan.

The company said it would defer to the UAW for the release of additional details about new investments.

Mulally’s Role

UAW President Bob King has said a pay package Ford awarded to Chief Executive Officer Alan Mulally this year makes it more difficult to get member support for a deal. Ford has said it must lower hourly labor costs that are higher than those at GM and Chrysler.

Mulally’s 2010 compensation rose 48 percent to $26.5 million. In addition, Ford rewarded Mulally in March with $56.6 million in stock for leading the automaker’s turnaround. King called Mulally’s compensation “excessive” and “outrageous” in a July interview with Bloomberg Television.

Mulally was involved in the talks “every day, often two and three times a day,” while in Russia and Asia the past week working on the company’s expansion plans there, Fleming said.

Workers at Ford also have filed an “equality of sacrifice” grievance against the automaker after salaried workers received raises, tuition assistance and 401(k) matches last year. The two sides met with an arbitrator Sept. 15.

Ford’s Wages

Ford shares fell 22 cents, or 2.4 percent to $9.15 at 10:15 a.m. in New York Stock Exchange composite trading.

Ford, based in Dearborn, has said it has the highest labor costs of the three union-organized U.S. automakers, at $58 an hour including benefits. Detroit-based GM’s labor costs are $56 an hour, according to the Center for Automotive Research in Ann Arbor. Chrysler has said its labor costs are about $50 an hour.

The second-largest U.S. automaker earned $4.95 billion in the first half of the year, as fuel-efficient models like the Fiesta subcompact attracted buyers. Ford’s U.S. light-vehicle sales are up 11 percent this year through September, ahead of the industrywide gain of 10 percent.

Ford earned $9.28 billion in the past two calendar years after $30.1 billion in losses from 2006 through 2008. The automaker borrowed $23.4 billion in late 2006, putting up all major assets including its blue oval logo as collateral. That helped Ford avoid the bankruptcies and bailouts that befell the predecessors of GM and Auburn Hills, Michigan-based Chrysler.

Strike Allowed

The union agreed not to strike Chrysler or GM as part of their U.S. government-backed bankruptcy reorganizations, allowing unresolved differences to be settled in binding arbitration. UAW members at Ford, which didn’t receive a U.S. bailout, rejected a strike ban.

“Ford’s membership has proven they’ll turn an agreement down, so they’ve got a track record,” Dziczek said today in a phone interview. “There’s been a lot of talk and dissatisfaction among the membership in public, but I think the UAW leadership has a good read on what the membership wants, and what they’ll accept and what they won’t.”

The new GM contract calls for boosting starting pay of entry-level workers to at least $14.78 an hour from $14. That wage rises to as much as $19.28 an hour by 2015 from a previous maximum of $16.23.

GM’s labor costs will rise 1 percent a year under its new contract, the smallest increase in four decades, GM said Sept. 28.

Signing Bonuses

GM agreed to pay a signing bonus of $5,000 for each union member. Chrysler had balked at signing bonuses that high, wanting its bonus to be about $3,500, according to two people familiar with the discussions, who asked not to be identified because the negotiations are private.

A raise for entry-level workers would be more costly at Fiat SpA-controlled Chrysler compared with GM or Ford. Chrysler, with about 25,500 UAW-represented employees, has said it has at least 12 percent of its workers at the entry-level rate while the rest are senior workers who are paid about twice as much.

About 4 percent of GM’s U.S. hourly workers are paid the entry-level wage, the UAW has said.

GM will offer buyout packages worth as much as $75,000 to its roughly 10,000 skilled-trades workers, the UAW said in a Sept. 20 briefing with reporters. Other employees eligible to retire can take $10,000 to stop working within two years so that GM can replace them with new hires at the lower wage rate.

--With assistance from Tim Higgins in Southfield, Michigan. Editors: Bill Koenig, Jamie Butters

To contact the reporters on this story: Keith Naughton in Dearborn, Michigan at knaughton3@bloomberg.net; Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

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