Ford-UAW Deal Pays Hourly Workers $10,000 in 2011 Bonuses

Ford Motor Co. (F) will pay most of its United Auto Workers-represented employees a $6,000 signing bonus, $3,752 in profit sharing and a $250 “competitive bonus” this year under a new four-year tentative agreement, the union said in summaries today.

Workers with a year or less of service will get a $5,000 signing bonus, the union said in highlights of the agreement. Ford will also make annual $1,500 payments to its UAW workers, which replace cost-of-living adjustments. If Ford earned $5 billion annually, workers could receive $20,000 in profit sharing payments during the term of the contract, the UAW said.

Ford committed to adding 12,000 hourly jobs in its U.S. manufacturing plants by 2015 as part of the agreement, the Dearborn, Michigan-based company said today in a statement. The figure includes 5,750 more than the 6,250 hourly positions previously announced to be added by the end of 2012, Executive Vice President John Fleming said at a news conference.

“What they did at Ford is pattern plus,” said Kristin Dziczek, a labor analyst with the Center for Automotive Research. “A lot of the core economic structure of the agreement is the same” as the union’s accord with General Motors Co. (GM), including the forgoing of raises for senior workers, higher-pay for entry-level employees and annual checks in lieu of cost-of-living adjustments.

Buyout Offers

Ford will offer buyouts of $100,000 for skilled-trades employees and $50,000 for production workers, the union said. GM offered as much as $75,000 for skilled-trades workers and $10,000 to production employees. GM is giving a $5,000 signing bonus and it isn’t pulling ahead the first-half profit sharing payment as Ford is.

“When you don’t lead, you’re able to pick up some icing on the cake in the contract,” UAW President Bob King told reporters today of Ford following GM’s lead in negotiations. “There’s a significant amount of icing” in the Ford agreement.

The tentative deal is subject to a ratification vote by Ford’s 41,000 U.S. hourly workers, which the union said it plans to complete by Oct. 16. The UAW said the national council’s vote in favor of recommending the accord to locals wasn’t unanimous.

“I strongly believe we negotiated a contract the members will be happy with,” King said. “Would they like fixed rate increases? Sure they would. I’d like to give it to them, but they know the competitive structure as well as I do.”

Fusion Plans

The automaker plans to invest $555 million to assemble the Fusion midsize sedan at a plant in Flat Rock, Michigan, according to the UAW. The factory will add a shift of workers and make 175,000 to 200,000 Fusions each year, Jimmy Settles, the UAW vice president who oversees the union’s Ford department, said at the union’s news conference. The car will continue to be made in Mexico, too, the UAW said.

The UAW is negotiating contracts for 113,000 workers at U.S. automakers for the first time since GM and Chrysler Group LLC went bankrupt in 2009. Workers at Ford, which avoided Chapter 11, have said they are seeking more from the automaker they helped save. Only Ford workers can go on strike in these negotiations because GM and Chrysler UAW-represented employees agreed not to walk out as part of their U.S.-backed reorganizations.

“This agreement recognizes that Ford would not have turned the corner had it not been for the commitment and dedication of its workers,” Settles said today in an e-mailed statement.

Entry-Level Wage

The majority of the 12,000 jobs Ford is adding will be workers making entry-level wages, Marcey Evans, a Ford spokeswoman, said today. Wages for those so-called Tier-2 workers have started at about $14 an hour, half of what senior workers make. Ford has said it has fewer than 100 UAW- represented workers receiving the lower wages.

“It’s our opportunity for bringing in new people,” said Fleming, Ford’s manufacturing and labor chief. The jobs “will help us with our overall labor costs by hiring in Tier-2 people.”

The entry-level wage will increase to as much as $19.28 an hour by the end of the agreement and no more than 20 percent of the workforce will be subject to those pay rates, the UAW said. That matches the limit in GM’s agreement.

More Work

Ford will be “in-sourcing” jobs from Mexico, China and Japan, the company said today in a statement. In addition to the Flat Rock plant, the company will add production of the Transit commercial van in Claycomo, Missouri; the C-Max hybrid wagon and plug-in in Wayne, Michigan; a medium-sized truck in Avon Lake, Ohio; and an unnamed vehicle in Louisville, Kentucky, according to the UAW.

“One of the areas we really concentrated on was jobs,” said Marty Mulloy, Ford’s vice president of labor affairs, who added that bargainers for both sides worked through the night to complete details on the new hires.

Ten engine and transmission factories and three stamping plants also will receive investments, the union said today.

Ford shares rose 71 cents, or 7.6 percent, to $10.08 at 4:01 p.m. in New York Stock Exchange composite trading.

Standard & Poor’s Ratings Services may raise Ford’s debt ratings. Ford’s corporate credit rating is now BB-, and it may be upgraded to BB+, the highest non-investment grade, if the labor accord is ratified and it “does not place Ford at a significant disadvantage” to GM, the ratings company said Sept. 29. S&P raised GM to BB+ from BB- because of its new contract.

Ford Investments

Ford said it pledged to invest $16 billion in the U.S., including $6.2 billion for its plants. Of the amount going to factories, $1.4 billion was previously announced for assembly plants in Missouri and Kentucky, and two factories that make batteries and transmissions in Michigan.

King has said a pay package Ford awarded to Chief Executive Officer Alan Mulally this year makes it more difficult to get member support for a deal. Ford has said it must lower hourly labor costs that are higher than those at GM and Chrysler.

Mulally’s 2010 compensation rose 48 percent to $26.5 million. In addition, Ford rewarded Mulally in March with $56.6 million in stock for leading the automaker’s turnaround. King called Mulally’s compensation “excessive” and “outrageous” in a July interview with Bloomberg Television.

Mulally was involved in the talks “every day, often two and three times a day,” while in Russia and Asia the past week working on the company’s expansion plans there, Fleming said.

UAW Grievance

Workers at Ford also have filed an “equality of sacrifice” grievance against the automaker after salaried workers received raises, tuition assistance and 401(k) matches last year. The two sides met with an arbitrator Sept. 15, and the UAW said today a hearing is scheduled Nov. 17 and Nov. 18.

Ford has said it has the highest labor costs of the three union-organized U.S. automakers, at $58 an hour including benefits. Detroit-based GM’s labor costs are $56 an hour, according to the Center for Automotive Research in Ann Arbor, Michigan. Chrysler has said its labor costs are about $50 an hour.

The UAW said it will be moving “quickly” to Chrysler, which is majority-owned by Fiat SpA. (F) King would not say if he expected to have a deal by Oct. 19, a deadline set by Chrysler Chief Executive Officer Sergio Marchionne.

“I didn’t put any deadlines on us,” King said. “I’m confident we can get a good deal with Chrysler.”

King on Marchionne

King disagreed with Marchionne’s contention that Chrysler can’t follow the pattern of wages and benefits set by GM and Ford.

“I respectfully believe that you can” follow the pattern at Chrysler, King said. “We did not do everything lockstep at GM and Ford because there are some differences. We’ll look at the Chrysler situation. They’ve got some differences from Ford and from General Motors in terms of demographics of the membership. And we’ll figure out creative solutions together.”

Ford, the second-largest U.S. automaker, earned $4.95 billion in the first half of the year, as fuel-efficient models like the Fiesta subcompact attracted buyers. Ford’s U.S. light- vehicle sales are up 11 percent this year through September, ahead of the industrywide gain of 10 percent.

Ford earned $9.28 billion in the past two calendar years after $30.1 billion in losses from 2006 through 2008. The automaker borrowed $23.4 billion in late 2006, putting up all major assets including its blue oval logo as collateral. That helped Ford avoid the bankruptcies and bailouts that befell the predecessors of GM and Auburn Hills, Michigan-based Chrysler.

Ford’s UAW Membership

UAW members at Ford rejected a strike ban and additional concessions in November 2009.

“Ford’s membership has proven they’ll turn an agreement down, so they’ve got a track record,” said Dziczek. “There’s been a lot of talk and dissatisfaction among the membership in public, but I think the UAW leadership has a good read on what the membership wants, and what they’ll accept and what they won’t.”

GM’s labor costs will rise 1 percent a year under its new contract, the smallest increase in four decades, GM said Sept. 28. Ford’s Fleming and Mulloy declined to give details today about their tentative agreement’s affect on the company’s costs.

King said the deal does not raise fixed costs at Ford.

“We believe that raising the fixed costs would be unfair and uncompetitive for Ford, General Motors and Chrysler,” King said. “If we’re going to succeed in the long run and really be able to have long-run security and decent income for our membership, we can’t put Ford, GM and Chrysler at a competitive disadvantage.”

To contact the reporters on this story: Keith Naughton in Detroit at knaughton3@bloomberg.net; Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net; David Welch in Southfield, Michigan at dwelch12@bloomberg.net

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

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