Jan. 25 (Bloomberg) -- Ford Motor Co. may resume paying executive bonuses to boost the morale of managers battered by three rounds of job cuts and plant closings in the past five years, people familiar with the matter said.

The No. 2 U.S. automaker is considering the renewal of bonuses as a way of supporting managers coping with reduced benefits, the elimination of merit raises and the threat of job losses, said the people, who didn't want to be identified because the discussions are private.

Ford paid no bonuses to its top 6,000 executives during the last two years. Ford's net income shrank to $1.44 billion for 2005. Ford said today it lost $5.8 billion in the fourth quarter and $12.7 billion for 2006, the biggest annual loss ever. The company is cutting 40,000 factory and white-collar jobs in hopes of restoring North American auto profits in 2009.

Restoring the bonuses may alienate the United Auto Workers union and its president, Ron Gettelfinger, in advance of midyear contract talks. ``Ford may be making a tactical mistake,'' said Dan Luria, an analyst at the Michigan Manufacturing Technology Center in Plymouth, Michigan.

``How does Ron Gettelfinger sell a story that the company is in deep trouble and needs relief when it can afford to pay these bonuses?'' Luria asked.

Union Opposition

At a union meeting in Detroit last week, Gettelfinger, 62, said he opposes the prospect of restored executive bonuses at Ford, said people familiar with the situation. Roger Kerson, a UAW spokesman, declined to comment.

Ford's board of directors makes final decisions on bonuses and other compensation issues. In past years, Ford paid the bonuses in March. That means the board may decide on bonuses at its next meeting on Feb. 8 or a month later.

Spokeswoman Marcy Evans declined to comment beyond saying no decision has been made.

The size of the bonuses varies. They can comprise the highest percentage of total income for Ford's most senior executives. For Chief Executive Alan Mulally, who signed his own compensation agreement with Ford when he was hired in September, the targeted bonus opportunity for 2007 equals 175 percent of his base salary of $2 million, according to a regulatory filing.

In recent years, the company has modified its criteria for awarding bonuses to include, among other things, statistical measures of quality and costs.

Contract Expiration

The current contract with the UAW and Dearborn, Michigan-based Ford expires Sept. 14. In a Jan. 3 meeting with reporters, Mulally said he plans to ask the union's help in strengthening Ford. He said wages, benefits and flexibility in deploying workers would be issues.

``It's all about the competitiveness of Ford,'' Mulally said, adding that Gettelfinger ``absolutely understands the situation we're in.'' The union leader began work at a Ford plant in Louisville, Kentucky, in 1964.

The fact that Ford is thinking about restoring bonuses over Gettelfinger's objections could signal a tougher bargaining stance toward the UAW, Luria said.

As of mid-September, 30 different UAW local unions had approved new contracts that provide Ford with greater flexibility in making job assignments inside its factories, said Ford spokeswoman Anne Marie Gattari.

Other measures indicate less unanimity. In December 2005, UAW workers narrowly ratified, by a 51 percent margin, a Gettelfinger- backed measure to reduce Ford's health costs.

Health Fund

Under that plan, Gettelfinger agreed that active workers would divert some future wage increases to a health fund and that retirees will pay as much as $752 a year per family for medical coverage. They had no out-of-pocket expenses previously.

Union workers had been scheduled to vote Jan. 21 on a plan to allow Ford's truck factory in Wayne, Michigan, to save money by operating four 10-hour days per week instead of the traditional five days with eight hours of work. The union decided late last week to postpone the vote, said Darryl Nolen, bargaining chairman of UAW Local 900 at the plant. He declined to say why.

Ford's white-collar workers are also feeling the impact of the company's restructuring. As part of its plan to return North American automotive operations to profitability, the company intends to eliminate 10,000 white-collar jobs by the end of this quarter. Ford said that if enough workers don't accept its voluntary buyout offers, it will resort to firings.

In a November announcement affecting North American white- collar workers, Ford said it will abolish merit-pay raises, require bigger payments for health care and reduce health-care payouts for retirees.

The changes for active workers will take effect June 1. Retiree changes take place on Jan. 1, 2008.

Restructurings

Ford began its first restructuring under Mulally's predecessor, William Clay Ford Jr., five years ago. That effort included the elimination of 23,000 jobs.

In January of last year, Bill Ford said he'd cut an additional 30,000 factory jobs by 2012, plus 4,000 white-collar positions. Eight months later, Mulally said he'd cut the 30,000 factory jobs by 2008 instead, and eliminate an additional 10,000 white-collar positions.

Ford's loss in the fourth quarter will be 95 cents a share excluding some costs, according to the average of 13 analyst estimates compiled by Bloomberg. That would translate to more than $1.5 billion.

The company's shares fell 2.7 percent in 2006, the seventh decline in the past eight years. The stock dropped 10 cents to $8.20 yesterday in New York Stock Exchange composite trading.

Ford's 7.45 percent note due July 2031 rose 0.125 cent to 82 cents on the dollar, according to Trace, the NASD's bond-price reporting system. The yield fell to 9.33 percent.

A credit-default swap based on $10 million of Ford bonds rose to $470,280 yesterday from $467,960 the day before, according to CMA Datavision in London. The contracts are used to insure bondholders against a borrower missing debt payments.

A decrease in price indicates improvement in the perception of credit quality. An increase suggests deterioration.

To contact the reporters on this story: John Lippert in Southfield, Michigan, at jlippert@bloomberg.net; Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

Last Updated: January 25, 2007 07:16 EST