Ford and UAW Reach Tentative Agreement
By Mike Spector and Jeffrey McCracken
The Wall Street Journal
Saturday, November 3, 2007
Ford Motor Co. and the United Auto Workers union reached a
tentative agreement on a new contract after more than 40 hours
of marathon negotiations over the past two days.
The new four-year pact, reached at 3:20 a.m. Saturday, followed
the pattern of deals ratified by workers at General Motors Corp.
and Chrysler LLC in that it will allow Ford to offload billions
in retiree health-care obligations off its books to a union-run
trust fund, known as a voluntary employees' beneficiary
association, or VEBA, Ford said. Ford's retiree
health-care obligation is believed to be about $23 billion. The
VEBA would likely become operative in 2010 if it follows the
same pattern as those established at GM and Chrysler.
The contract, which covers about 54,000 represented employees,
would also likely allow Ford to pay a host of so-called non-core
workers a lower, second-tier wage, though that and other
specific details were not available early Saturday morning.
Those concessions could free up resources for Ford to reverse
losses in its core North American operations and return to
profitability by 2009, a linchpin goal of its accelerated
The latest contract negotiations were smoother than those
between the union and
auto makers. Unlike previous negotiations with GM and
Chrysler, the UAW didn't set a strike deadline with Ford.
Workers at GM and Chrysler walked off the job after strike
deadlines expired during their talks, but GM's strike lasted
only two days and Chrysler's just a few hours before deals were
Neither Ford nor the UAW provided further details on their
tentative pact. Bob King, the UAW's lead Ford negotiator,
said in a statement that the agreement "made progress" to "win
new product and investment, to enhance job security and protect
"Our bargaining committee came through for our active and
retired members," said UAW President Ron Gettelfinger, in a
statement. "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
The union will share pertinent details of the tentative pact
with local UAW leaders soon but did not give details about when
such a meeting will occur. A simply majority of Ford's
union workers must approve the contract for it to be ratified.
Joe Laymon, Ford's human resources and labor affairs chief, said
in a statement that the tentative deal is "fair to our employees
and retirees, and paves the way for Ford to increase its
competitiveness in the United States."
Ford, which posted a record $12.6 billion loss last year, is
widely viewed as the sickest of
Detroit's auto giants and people familiar
with the negotiations said the auto maker wanted to contribute
less cash upfront to a union-run trust. In return, Ford
was mulling keeping open one or two unionized plants it had
intended to shutter as part of its restructuring, these people
If ratified, the deal would complete a historic round of
contract negotiations that has transformed the business model
for the domestic auto industry. Leaders of
Detroit's unionized workforce conceded as
untenable the competitive cost disadvantage between their
domestic auto makers and Asian rivals such as Toyota Motor Corp.
The upshot is the UAW has now taken on the role of an investor,
shouldering the bulk of responsibility for shepherding a large
chunk of health-care obligations for its retired members.
In addition, the union departed from a long-held tenet of equal
pay for equal work dating back to famed union boss Walter
Reuther. Detroit's auto makers will now be allowed to pay
so-called non-core workers, who do jobs off the assembly line
such as material handling, a second-tier wage and benefit
package that is about half that of production workers.
The landmark concessions come during continued struggles at Detroit's auto companies, which have suffered
sales declines and market share losses amid the slowing economy
and relentless competition from foreign car makers. At one
point, the collective market share of
Detroit's three auto titans dipped below
50% for the first time in history.
Auto makers have signaled they plan to move quickly to take
advantage of their new labor pacts in an effort to return to
profitability. GM recently cut shifts at three of its
plants, laying off nearly 3,000 workers while Chrysler – under
new ownership by private-equity firm Cerberus Capital Management
LP – just announced a plan to eliminate shifts at several North
American plants, slashing upwards of 10,000 jobs.
Ford, too, is looking to further cut costs, according to people
familiar with the matter. For Ford, the move includes an
effort to trim 2008 budgets and spending by up to 15% in some
departments, people familiar with the matter said, though it was
unclear how the cuts would be implemented.
In an effort to stay on track to hit a target of $5 billion in
operating cost reductions by the end of 2008, Ford is cutting
budgets in areas such as sales, marketing and perhaps
engineering, Ford officials familiar with the matter said.
Also, employee benefit plans will be modified and unfilled jobs
eliminated to further cut spending, these people said.
Ford is also battling to cut net materials costs amid price
spikes for commodities such as steel and oil.
UAW leaders will now turn their attention to winning
ratification of their newly negotiated contract with Ford.
A ratification vote by Chrysler workers faced stiff resistance
but eventually passed. It was unclear how Ford workers
might react to a similar pact, though local union officials in
recent days expressed sympathy for the auto maker's dire
financial plight and were anxious to get an agreement passed.
Still, certain details of the agreement could sway influential
local union leaders one way or the other.
The recent swift actions by GM and Chrysler to reduce plant
shifts could unnerve Ford workers, who might expect Ford to do
the same after a deal is ratified. Another key metric:
Ford reports its third-quarter earnings Thursday, which could
further color union workers' views on the company's most current
In addition, Ford has secured many plant-specific cost
reductions at its factories, known as competitive operating
agreements. Those earlier concessions could play a role in
how Ford's workers view further givebacks.
Ford turned a profit the first half of this year, boosted in
part by one-time items such as the sale of its Aston Martin
luxury brand. The auto maker remains unprofitable in its
core North American market.
Write to Mike Spector at
and Jeffrey McCracken at