UAW Accepts Ford's Better Idea
March 10, 2009
By Bill Visnic
Rank-and-file members of the United Auto Workers union yesterday gave the union the authority to make amendments to the union's 1997 contract with Ford in order to help the automaker further ease its labor costs and debt burden.
The positive vote was not overwhelming: The Detroit News reports only about 58 percent of the UAW's production and skilled-trade members who work for Ford agreed to the contract changes. But the majority of UAW workers went for the deal, meaning Ford has won another important battle in the war to improve its balance sheet.
The new amendments end the notorious Jobs Bank that provided laid-off workers nearly full pay and benefits for extended periods of unemployment. The deal also freezes certain pay rates and curtails select bonuses.
But most critically, perhaps, the amendment allows Ford to exchange equity shares in the company in lieu of cash payments to the UAW's Voluntary Employee Benefit Association fund established in the 2007 contract with each of the Detroit Three automakers to assume all future liability for retiree health-care costs. Ford sought in the new contract amendments to use equity to pay half of its obligation to the VEBA fund, which is estimated to total approximately $15 billion.
It is believed ratification of the amendment of the labor agreement between Ford and the UAW would set a pattern for similar deals with General Motors Corp. and Chrysler LLC, both of which continue to struggle for solvency. GM reportedly owes some $30 billion to the VEBA and Chrysler $9 billion.
"Once again UAW members have stepped up to make the difficult decisions necessary to deal with the reality of the current economy, the deteriorating auto industry as a whole and specifically the negative impact the economic climate is having on Ford Motor Co.," said UAW President Ron Gettelfinger in a statement.
Joe Hinrichs, group vice president for global manufacturing and labor affairs, said, "By working together with our UAW partners, we identified solutions that will help Ford reach competitive parity with foreign-owned auto manufacturers and that are important to our efforts to operate through the current economic environment without accessing a bridge loan from the U.S. government."
The portion of Hinrichs' statement dealing with "competitive parity with foreign-owned auto manufacturers" is a direct reference to repeated concerns expressed by several U.S. politicians that Detroit Three automakers' UAW-related labor costs are not competitive with non-unionized labor rates for competing automakers -- particularly transplant Japanese plants.
It is also believed such extensive concessions from the UAW are one factor necessary to convince President Obama's newly formed automotive task force -- which visited Detroit yesterday -- that the Detroit automakers can effectively restructure their businesses and return to profitability.
For GM and Chrysler, which have accepted billions in loans from the U.S. Department of Treasury's Troubled Assets Relief Program, the latest UAW concessions may prove a vital point in convincing the Obama administration's task force that the companies should not be forced into bankruptcy -- a strategy many policymakers now are saying is the most responsible action in light of the hundreds of billions in taxpayer dollars already extended in increasingly criticized federal "bailout" programs.
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