DETROIT — United Auto Workers President Ron Gettelfinger and his lieutenants will meet Monday afternoon with local union leaders trying to build support for a tentative contract reached with Ford Motor Co. over the weekend.
The agreement, which is regarded as a landmark concessionary deal that will help the company better compete against Asia-based rivals, must now be ratified by a majority of the 54,000 UAW-represented employees at Ford, The Wall Street Journal reported.
Ford’s agreement gives the auto maker greater concessions in terms of wages and retiree health-care funding than the union granted to General Motors Corp. and Chrysler LLC, said people familiar with the matter. Ford is seen as the weakest of Detroit’s Big Three and reported a loss of $12.6 billion last year.
Over the past few weeks, the UAW has reached agreements with Detroit’s auto makers that allow them to unload massive retirement obligations, pay lower wages to new workers and have more flexibility to cut jobs and production. But the new labor agreement with Chrysler was nearly rejected last month after majorities at several large plants voted against it. It is unclear how much rank-and-file opposition the Ford deal will face.
A Ford spokeswoman declined to comment. A UAW spokesman didn’t return calls.
One factor that could provide momentum in favor of ratification: Ford promised to keep open two assembly plants it had intended to close, people familiar with the matter said. Ford also has agreed to avoid closing any other assembly plants in the U.S. for the life of the four-year contract, but the plants could be closed thereafter, these people said.
? The News: Ford reached a tentative four-year agreement with the United Auto Workers union that requires ratification by a majority of hourly UAW workers.
? What’s Next: The union’s leaders will now present the agreement to members and push for its passage, following a close vote at Chrysler last month.
? The Sell: The agreement gives unprofitable Ford greater concessions in some areas, but the union will keep two plants open under the deal.
The two plants, which Ford hasn’t identified, are part of a handful of factories Ford had planned to shutter by 2012 as part of its restructuring plan. Plants generally thought to be in jeopardy were a stamping and assembly plant in Wayne, Mich., and an assembly plant in Louisville, Ky., where Gettelfinger once worked, a person familiar with the matter said.
Ford’s workers have already agreed to plant-by-plant cost-cutting measures, known as competitive operating agreements, and local union officials have expressed sympathy for Ford’s dire financial plight and the desire to get a deal done.
“Bottom line is, we want our jobs. We want tomorrow,” said Jim Stoufer, president of UAW Local 249, which represents workers building Ford’s F-Series pickup trucks and Escape sport-utility vehicles in Kansas City, Mo. “We’ve done what we were asked. We gave and we gave.”
The pledge to keep plants open is likely to draw the scrutiny of Wall Street, which is paying close attention to Ford’s progress in its turnaround plan, including a goal to return to profitability by 2009. GM and Chrysler cut production recently in reaction to the downturn in auto sales this year.
In exchange for keeping the two plants open, Ford received a major concession on wages that in some ways goes beyond the deals reached at GM and Chrysler, people involved in the talks said. Ford now will be able to pay all new hires, including assembly-line workers, a lower, second-tier wage — about $12 to $16 an hour, or half of current wages, these people said. That differs from arrangements made at GM and Chrysler, which assigned lower wages to what they defined as noncore jobs.
Another concession involves what is known as the Jobs Bank, a system under which laid-off UAW workers still get paid. Ford will have greater ability to take laid-off workers out of the Jobs Bank if they turn down an open job elsewhere, these people said.
With the proposed contract’s flexibility, Ford will seek to buy out an additional 10,000 to 14,000 people in the next three years, said the people familiar with the matter. That is on top of a previous effort to reduce hourly workers by 25,000 to 30,000 through buyouts and attrition.
The tentative pact allows Ford to unload billions in retiree health-care obligations from its books to a union-run trust fund, known as a voluntary employees’ beneficiary association, or VEBA. Ford’s current retiree health-care obligation stands at about $22 billion.
Like GM and Chrysler, Ford would continue to pay its retiree health-care liabilities over the next two years and then contribute to the union-run trust, which would become operational in 2010, according to a person involved with the negotiations. By that time, Ford’s retiree health-care obligation will be about $17 billion, this person said.
One difference in the agreement struck with Ford is that the auto maker will contribute less cash to the union-run health-care trust — about 45% of the overall contribution as opposed to 55 percent at GM and 50 percent at Chrysler, this person said. The remainder of the contribution will be made up of equity and convertible debt, another person said.
The structure of the VEBA will make the UAW a major investor in Ford with about a 16 percent to 17 percent stake, initially making the union one of its largest shareholders.
Ford Chief Executive Alan Mulally was at the negotiating table with the UAW’s Gettelfinger ensuring completion of the deal for the last nine hours of talks, which ended with an agreement at 3:20 a.m. Saturday, a person involved in the talks said. That capped more than 40 hours of marathon negotiations. The tentative deal was presented to Ford’s board over the weekend to unanimous approval, this person said.
This story was written by The Wall Street Journal.
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