Detroit - Workers at Ford have ratified a deal that will save the struggling automaker billions of dollars in health care costs, the United Auto Workers union said on Monday.
The announcement comes as the US government's "working group" on the automobile industry was meeting with the union and top managers of General Motors and Chrysler as they try to chart a way to restructure the two companies to avoid bankruptcy.
The deal will allow Ford to cut labor costs and meet up to 50% of its $13.2bn obligation to a trust fund for retiree health care benefits with common stock instead of cash.
A similar agreement is expected shortly at GM and Chrysler because the union maintains similar contracts at each of the Detroit Three.
That will allow GM to cut its cash outlays by as much as $10bn and Chrysler to improve its liquidity position by $5.3bn.
A deal is also necessary in order for GM and Chrysler to meet a key requirement of their $17.4bn bailout packages ahead of a March 31 deadline.
While Ford has repeatedly said it has enough cash to survive the downturn without government aid, it has used the deep recession in the industry to seek concessions from the union.
Ford welcomed the deal, which it said would help it weather the collapse of auto sales amid a deepening recession and become more competitive in the long-term.
Rebuild industry
"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 US government," Joe Hinrichs, Ford vice president for global manufacturing and labour affairs, said in a statement.
The UAW has always enjoyed better relations with Ford than with either Chrysler and GM and the union is using the negotiations with Ford to shield itself from demands for more concessions from the other two automakers.
"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," said UAW President Ron Gettelfinger.
The deal was approved by a relatively narrow margin: 59% of production workers and 58% of skilled-trades workers voted for the agreement.
"We are focused on doing everything possible to rebuild a great industry and keep manufacturing jobs in the United States," Gettelfinger said in a statement.
"As we have stated many times, in order to succeed, shared sacrifice will be required from all stakeholders, including executives, directors, shareholders, bondholders, dealers and suppliers."
The contract concessions will also eliminate two paid holidays, eliminate two one-time productivity bonuses due next year, end the quarterly cost-of-living wage adjustments and put new limits on supplemental unemployment benefits that workers have been paid for a half-century.
The Detroit Three reached a deal with the UAW in 2005 to transfer responsibility for retiree health care befits to the union by setting up a Voluntary Employee Beneficiary Association (VEBA).
Ford said at the time that it would be able to reduce its overall health care liability by $5bn as a result of the deal, which it estimated would also produce an average annual net corporate savings of about $650m.
Ford shares closed up 2.35% at $1.74.
- AFP