Trade-Offs Aplenty in Proposed Ford-UAW Deal
November 07, 2007

By Bill Visnic

DETROIT -– Don’t insist on identifying a definitive winner and loser in the tentative labor contract hammered out this past weekend between Ford Motor Co. and the United Auto Workers (UAW) union. There wasn’t one.

In the agreement awaiting ratification by rank and file workers, the UAW got assurances from Ford there won’t be any additional plant shutterings beyond those already earmarked for closure -– despite the fact Ford’s sales suggest the company needs to shed more capacity. And there is some commitment from Ford regarding new models for several plants.

Ford won a cost-saving two-tier wage structure –- similar to but perhaps less restrictive than the UAW also granted to General Motors Corp. and Chrysler Corp. earlier this fall – and the feature du jour of this season’s labor negotiations, the establishment of a voluntary employees’ beneficiary association (VEBA) to eventually fund all retiree health-care costs, removing that increasingly staggering burden from Ford’s books.

Ford will pay a total of $15.4 billion for retiree health care, the bulk of which is a $13.2-billion injection into the VEBA, says the UAW.

The UAW also says the new contract will mean an additional $12,904 for a typical Ford assembler over the life of the contract, including an immediate signing bonus of $3,000.

Meanwhile, the Detroit News reports that the agreement allows Ford to start new hires at just $14.20 per hour, roughly 50 percent less than the wage new workers currently make. There are provisions for scaled-back benefits, as well. The two-tier structure won by GM and Chrysler applies only to specifically defined job descriptions, while the Ford agreement calls for a corporate-wide cap stipulating that no more than 20 percent of jobs can be entry-level.

Most of this was expected, however. More intriguing is Ford’s agreement to continue operations at certain facilities it previously said would be shuttered, as well as future commitments for several other key assembly plants and components-making operations.

In its Way Forward plan, Ford has closed or had plans to close 16 facilities in the U.S., including its Wayne (MI) Assembly and Stamping plant and its Ohio Assembly Plant in Avon Lake. But in the new labor agreement, Ford capitulated regarding Wayne and Avon Lake. Wayne is earmarked for a new product once the Ford Focus currently built there is discontinued. Avon Lake is promised a new product after today’s E-Series trucks have run their course.

Ford’s Twin Cities (MN) assembly plant, currently producing the slow-selling Ford Ranger and Mazda B-series compact pickup trucks, slated for closure in 2008, will have Ranger production extended for one year, says the UAW. Ford cut a similar deal for its Cleveland (Ohio) Casting plant, extending its production of iron engine casting components for another year, until 2010.

More important, Ford also agreed to refit Wayne and Avon Lake -– as well as its Louisville (MO) assembly, Kentucky Truck, and Kansas City (MO) Assembly plants –- with new flexible body lines, an expensive commitment (some estimates put it at $2 billion) that prepares those plants to be more adaptable to future market demand and virtually assures those sites’ long-term futures, it appears.

One point of ongoing tension between the UAW and Detroit automakers, the Jobs Bank, will continue with Ford under the new labor proposal, but in a reduced form that allows idled workers to stay in the Jobs Bank for just two years if they refuse more than two new assignments. The controversial Jobs Bank issues idled workers almost all of their standard pay and benefits if they are not working.

Ford also makes strong promises to limit outsourcing of jobs to non-UAW labor, and the UAW says Ford, in fact, agreed to insource “work totaling more than 1,500 jobs during the life of the agreement.”

Under the new agreement, the UAW also wins more input regarding supplier relationships and will have a seat on Ford’s Manufacturing Operating Committee, a move the UAW says will give it more direct input into Ford’s product-related decision-making processes.

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