Ford reportedly eyes more UAW cuts

NEW YORK (CNNMoney.com) -- Ford Motor may seek deeper cost cuts from the United Auto Workers union than those that the union granted to General Motors, according to a published report.

The Detroit News reports that Ford CEO Alan Mulally is seeking to cut Ford's labor costs by a third in order to restore its competitiveness.

The automaker, which lost its long-held position as the nation's No. 2 automaker to Toyota Motor (Charts) with the August sales report, lost a record $12.7 billion in 2006. While the company posted a unexpected profit in the second quarter, it still lost money on its core North American auto operations.

Mulally, who was brought in as Ford CEO a year ago, is credited with turning around the commercial aircraft division of Boeing (Charts, Fortune 500), as the company took a 28-day strike by the International Association of Machinists to win the contract it was seeking.

GM (Charts, Fortune 500) reached a deal with the UAW early Wednesday morning, ending a two-day strike. The deal shifts an estimated $51 billion in future health care coverage for retirees and their family members from GM to union-controlled pension funds. GM will have to contribute tens of billions in cash, stock and debt to the trust fund to cover those obligations, but getting the liability off its balance sheet will improve its profitability.

Ford and Chrysler want to win agreement for the same kind of shift to trust funds for their retirees, although together they have fewer UAW retirees and surviving spouses than does GM. Their combined liability is estimated at just under $50 billion.

The union may resume contract talks with Ford and Chrysler on Monday, according to a report in the Detroit Free Press. The UAW is due to start laying out details of the tentative agreement reached with GM to local union officials Friday ahead of the start of the rank and file ratification process that starts this weekend.

Typically the UAW uses the first contract agreement it reaches with one of the major automakers to set a pattern for the deal with the other two. It could be difficult to win agreement from the union for significantly better terms than those agreed to at GM. Still the union has been sensitive to concerns that the automakers need cost savings in order to become competitive and save members' jobs in the long-term. All the U.S. automakers have been closing plants, cutting staff and capacity, in recent years in the face of declining market share.

GM has progressed far further in its turn around efforts than its Detroit-area rivals. GM posted a narrow profit on its North American operations in the second quarter, although it is still expected to post a loss in that key unit for the full year.