Ford Says Hourly Labor Costs $8 More Than Nonunion Plants

Ford Motor Co. (F), set to enter contract talks with the United Auto Workers, said its U.S. labor costs are now $8 an hour higher than the mostly nonunion U.S. factories of foreign automakers such as Hyundai Motor Co. (005380)

Ford, on a website it posted last month, said it pays about $58 an hour in wages and benefits to its 40,600 U.S. hourly workers, $3 more than the automaker said last year. Labor costs average $50 an hour at the U.S. plants of international automakers such as Japan’s Toyota Motor Corp. (7203) and South Korea’s Hyundai, according to Ford.

Closing the labor cost gap with foreign automakers’ U.S. plants was important to the restructuring Ford, General Motors Co. (GM) and Chrysler Group LLC undertook two years ago. Ford, the only one of the three to avoid bankruptcy, convinced the UAW to accept concessions in 2009 that lowered annual labor costs by $500 million and cut hourly rates to $55, Ford said at the time.

“There is still a gap,” Dearborn, Michigan-based Ford wrote on www.fordahead.com, a website that details its negotiating position in contract talks. “We cannot continue to have a cost gap with the competition and still be able to make significant U.S. investment and create new jobs. For Ford to be fully competitive in the years ahead, we’ll need to focus on closing the gap even more.”

In a speech in New York last October, Chief Financial Officer Lewis Booth said the automaker’s labor costs were “close to being fully competitive.” He said Ford’s labor costs would drop to $50 an hour, from $55, once the automaker hires new workers, who can be paid half what senior workers make.

Profit Sharing

Ford’s labor costs have risen, in part, because of the $5,000 profit sharing checks the automaker handed out to U.S. workers this year, said Marcey Evans, a company spokeswoman. Ford earned $6.56 billion last year, the most since 1999.

“Profit sharing has been added to the amount and the $5,000 adds about $2 an hour to our labor costs,” Evans said in an interview today. “Without that, our labor costs are closer to $56 an hour.”

Ford rose 3 cents to $15.11 at 4:03 p.m. in composite trading on the New York Stock Exchange. The shares have fallen 10 percent this year after rising 68 percent in 2010.

Ford’s new website is more elaborate than previous online repositories of labor information the automaker has posted, she said. The site, which went live April 21, is aimed at informing the media and “influential thought leaders” about the issues in this year’s contract talks as Ford sees them, she said.

Ford’s Side

“This is a site where folks can go to get the facts and Ford’s point of view on the issues that are in play,” Evans said of the site, which includes a video of Chief Executive Officer Alan Mulally, articles about Ford and the auto industry, and photos of workers on the assembly line.

Michele Martin, a spokeswoman for the UAW, didn’t immediately respond to a request for comment.

UAW President Bob King will negotiate new contracts this year with Ford, GM and Chrysler. While the agreements don’t expire until Sept. 14, King has said workers must be rewarded for the $7,000 to $30,000 in concessions they each gave since 2005 to help the automakers survive.

King told delegates to the union’s bargaining convention in March that he is committed to gaining back what workers gave up. The concessions included surrendering raises, bonuses and cost- of-living adjustments as well as agreeing to a two-tier wage system, in which new hires earn about $14 an hour, half the wage paid to senior production workers, and limited benefits.

“We did what we had to do to save the companies,” King said in a March 22 speech at the convention in Detroit. “It will take time to win back what we’ve given up.”

Narrowing Gap

The concessions helped the U.S. automakers lower labor costs to about $58 an hour for wages and benefits from about $75 an hour and get close to the $52 an hour Toyota gives its U.S. workers, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor, Michigan.

Labor rates at U.S. automakers remain above the $44 to $48 hourly rate Hyundai pays its U.S. workers in wages and benefits, McAlinden has said.

To come up with the $50 an hour average for foreign automakers’ U.S. workers, Ford blended labor rates among several international carmakers, Evans said. In 2007 contract talks with the UAW, U.S. automakers benchmarked Toyota’s Georgetown, Kentucky, factory.

“We have to be competitive period and we can’t look at just one location,” Evans said. “No matter how you look at it, there’s still a gap. We need to be competitive with not just one location; we need to be competitive with the full range.”

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.