Ford, UAW reach deal
Final labor pact among Big Three automakers is first this year reached without a strike; covers 55,000 auto workers.
NEW YORK (CNNMoney.com) -- Negotiators at embattled Ford Motor Co. and the United Auto Workers union reached an agreement on a tentative labor pact early Saturday after marathon talks that went through two straight nights, becoming the only U.S. automaker to reach a deal this year without a brief strike.
Statements from the union and Ford confirmed the deal, which was reached about 3:20 a.m. ET Saturday. The final round talks had taken place virtually non-stop since they started Thursday morning.
"We believe (the deal) is fair to our employees and retirees, and paves the way for Ford to increase its competitiveness in the United States," said a statement from Joe Laymon, group vice president for human resources and labor affairs.
"Our bargaining committee came through for our active and retired members," said a statement from UAW President Ron Gettelfinger. "Our team is proud of each and every negotiator because they have encouraged Ford to invest in product and people while addressing the economic needs of our active and retired members."
Terms of the deal, which will cover about 55,000 members of the union, were not immediately available. But Laymon's statement confirmed it follows the outline of deals at U.S. rivals General Motors (Charts, Fortune 500) and Chrysler LLC on the key negotiating goal of shifting billions in future health care costs for hourly retirees and their family members from the company to union-controlled trust funds.
The UAW had estimated that there were about 95,000 retired union members and an additional 28,000 surviving spouses who now receive health care coverage from Ford (Charts, Fortune 500). The promise to provide that health care going forward would cost the company more than $20 billion above what it has already set aside to make those payments, according to estimates.
The agreement needs to be ratified by rank-and-file UAW members before it takes effect. UAW members at both GM and Chrysler ratified deals that were reached there last month, although there was far more opposition to the deals than is typical in such votes.
While the union had signaled a willingness to set up such trust funds from the start of talks, details of the amount and mix of assets that would be put in the funds by the companies, along with the job guarantees that would be available for the auto workers at each company made reaching final deals difficult.
While GM offered the union specific promises about continued investment and new products to keep its U.S. plants open, Chrysler was far more limited in its job guarantee in its deal. This week, within days of the contract being ratified, Chrysler started a new round of layoffs that will cut up to 10,000 additional union jobs and about 2,000 salaried and contract positions as it tries to bring the company's capacity more in line with the reduced demand for its products.
The deal at Ford was widely expected to also include severance and retirement packages that will lead to thousands of additional hourly employees leaving the company. While Gettelfinger's statement talked about encouraging Ford to invest in product, it did not make mention of any guarantees.
Ford is the most financially troubled of the U.S automakers. It 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.
Analysts surveyed by earnings tracker Thomson First Call are forecasting the company lost 46 cents a share, or about $933 million, in the three months ending Sept. 30. That would actually be an improvement from the year-earlier period when it lost 62 cents a share, excluding special items.
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.
The union had an incentive to help the troubled automaker become more competitive with non-union Japanese rivals such as Toyota Motor (Charts), Honda Motor (Charts) and Nissan (Charts).
Many experts have said the future of the company was at stake in these talks. 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.
Ford has seen U.S. sales down 13 percent through the first 10 months of the year, as it lost its long held position as the nation's No. 2 automaker to Toyota.
Part of the sales decline was intentional, as the company cut back on fleet sales of its cars to businesses such as rental car companies, sales that were at a lower, less profitable price than retail sales. But it has also seen drops in sales of some core products, such as the F-Series pickup truck and the Explorer SUV.