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Ford to add or retain 12,000 jobs, invest $16 billion under UAW pact

Tue, 04 Oct 2011

Ford Motor Co. said today 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 UAW.

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

The investments will cover new models, factory capacity and powertrains, Ford said. The automaker also plans to insource manufacturing work from Mexico, Japan and China.

The 12,000 jobs to be added during the contract include 6,250 previously announced hourly positions. The 6,250 positions will be filled with existing workers and new hires, Ford officials indicated today.

An additional 5,750 jobs will be filled throughout the term of the contract with new hires, Ford said.

The Detroit Free Press and The Detroit News said the tentative deal includes a $6,000 signing bonus upon ratification.

Under the pact, Ford will also offer buyouts of $50,000 to production workers and $100,000 to skilled-trades workers, clearing the way for the automaker to hire more entry-level employees at lower wages, the Detroit Free Press reported.

The paper said Ford's plant in Flat Rock, Mich., will receive $500 million in new investment to build the Ford Fusion mid-sized sedan, which will also continue to be assembled in Mexico. The Michigan plant, with about 1,600 workers, will also continue to build the Ford Mustang, the Detroit Free Press reported.

"It's our opportunity for bringing in new people," said John 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, three people familiar with the negotiations told Bloomberg.

"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.

Profitable growth

The $16 billion overall investment is for new programs, including engineering, supplier tooling, and other costs, Fleming said. Of that, $6.2 billion is targeted for plant improvements, including new tooling, he said.

"This agreement allows us to make even more progress on our One Ford plan and our focus on the great products, stronger business and better world that will deliver continued profitable growth for all," Fleming said in a statement.

UAW President Bob King and Jimmy Settles, head of the UAW's bargaining at Ford, were holding a press conference late this morning.

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

Analysts had expected the Ford agreement to be similar to an earlier deal with General Motors Co., though Ford agreed to the higher signing bonus.

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, Mich., 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 CAR, 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.

More jobs wanted

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.

During the talks, the UAW also pressed Ford to permanently hire the growing ranks of temporary workers inside its plants. In addition, analysts said the union sought future products for the underutilized plant in Flat Rock, and another in Avon Lake, Ohio.

Mazda Motor Corp. -- Ford's longtime partner -- announced this summer plans to stop building the Mazda6 mid-sized sedan at the Flat Rock plant, leaving output of the Ford Mustang on just one shift.

Ford's Avon Lake, Ohio, assembly plant builds the Ford E-Series van on a single shift.

Ford still plans to close a factory in St. Paul, Minn., in December when production of the Ranger pickup ceases.

Ford is also investing $400 million to retool a Kansas City, Mo., assembly plant to build an unspecified vehicle, though the project is not expected to generate new jobs.

The GM accord

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. In a major victory for the union, GM will reopen an idled assembly plant in Spring Hill, Tenn., beginning next year.

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.

High expectations

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 King has called the payout "morally wrong."

By David Phillips- Automotive News