Banged-up Ford next target for UAW

NEW YORK (CNNMoney.com) -- General Motors and Chrysler LLC got most of what they wanted from the United Auto Workers, even if it took two blink-of-the-eye strikes to get it.

The big question on Thursday, in the wake of a six-hour strike and tentative deal with Chrysler and rank-and-file ratification of a contract with GM (Charts, Fortune 500), is whether the terms of those pacts will be enough for Ford Motor (Charts, Fortune 500), by far the industry's most troubled automaker.

Auto workers at Ford could soon be asked to approve even greater cost savings than their counterparts at GM and Chrysler.

Ford lost a record $12.7 billion in 2006, and while the company as a whole managed to post a second-quarter profit, its core North American auto operations aren't expected to return to profitability until 2009 at the earliest.

It has closed six major plants in the last 18 months and has trimmed its U.S. hourly labor force by a third in the last year. But it's not done with the cost-cutting: Ford expects to close another 10 plants during the life of the new UAW contract it will try to reach in the coming weeks.

The future of the company is at stake. Ford has mortgaged much of its facilities and equipment to the hilt - despite the junk bond status of its debt - to pay for its ambitious turnaround effort. Failure could lead to bankruptcy and the end of the Ford family's control over the company's shares.

Chairman Bill Ford Jr., great grandson of the founder, already gave up the CEO a year ago and brought in Boeing (Charts, Fortune 500) commercial aircraft chief Alan Mulally to shake things up.

The company is starting to make some hard calls that it had avoided in the past. It stopped making vehicles that only rental car companies wanted to buy, even though that meant giving up its long-held position as the nation's No. 2 automaker to Toyota Motor (Charts) in terms of U.S. sales during the last few months.

Now it is the roughly 55,000 UAW members at Ford that will be asked to accept some hard choices.

GM paved the way by getting the union to accept a four-year deal with no increase in base pay, a lower pay structure and less attractive benefit packages for new hires. It also shifted $51 billion in future health care costs for retirees and their family members to a union-controlled trust fund. While details of the Chrysler agreement were not available Thursday, the union and company confirm that they follow the pattern set at GM.

But David Cole, chairman of the Center for Automotive Research, said Ford may need to get even more cost savings from the union, given its current weakened condition.

"They need to get a better deal," he said. "I'm not sure exactly what that will be. It could be any number of different things, even a temporary reduction in salary. They'll package it in the same framework, but they have to have a better deal."

But other observers suggested that Ford is heading into the talks in better shape than commonly assumed, particularly since it has already won some greater savings on the local level.

When Ford announced plans early last year to close 16 plants by 2012, it identified only 10 of the facilities on its hit list.

That gave it leverage to go to the other plants and negotiate with the local unions separate deals, called "competitive operating agreements," that change the work rules at particular plants. Cole estimated that those deals will save the company $800 million a year.

"Ford in many ways is the weakest of the three, but it also has the most intense experience working with the UAW," said Harley Shaiken, a University of California professor who is an expert on auto industry labor relations. "It has signed 31 agreements out of 33 plants. That's impressive."

Bob Schulz, managing director for auto industry credit ratings at Standard & Poor's, said that Ford started its turnaround effort later than GM did. In addition, he added that Ford has been saddled with an older product lineup, the sales of which have dropped sharply in the current slump in light truck sales.

"I don't know if it's so much that Ford is intrinsically weaker; it's just in a different place than GM," he said. "Because of that, they'll be using more cash in the next year or two."

UAW President Ron Gettelfinger said Thursday that he is not worried about upcoming talks with Ford and that he believed it would be able to live with the pattern set at GM and Chrysler.

"Ford understands pattern bargaining," he said in an interview on Detroit radio, making his only public comments since the strike and agreement at Chrysler. "I'm hoping we can go to Ford and come out of there with a tentative agreement without any kind of altercation and just move forward."

And Bill Ford, speaking last week, seemed to suggest that Ford could live with something along the lines of the GM deal, which at the time was the only agreement that had been reached.

"We are very prepared to get going," he said. "We are still learning all the details of the GM deal, but the broad framework is certainly something we can work with."

But it is likely going to be a week or more before the Ford-UAW talks get going in earnest. The UAW still needs to distribute the summary of the deal at Chrysler to its members, as it begins the ratification process.

"I'm not really that concerned about it," Gettelfinger said Thursday, referring to the Ford talks. "My main concern is getting through with Chrysler."