Ford Motor f said Wednesday that recent modifications to its contract with the United Auto Workers union would help the company achieve parity with wages paid in the United States by overseas-based automakers.
In a conference call to review changes to the 2007 collective bargaining agreement, Ford said its labor and benefit costs would total $55 an hour by the end of the year, compared with estimates of $48 to $49 at foreign automaker plants in the U.S.
Ford said that further parity would be achieved in the following years, but did not offer specific numbers.
"We looked at transplants and our European divisions, and that drove us to a certain target with the UAW," said Joe Hinrichs, group vice president of global manufacturing and labor affairs for Ford, during a conference call regarding the changes.
"We looked at our cost structure with how we were making profits in other parts of the world," he said. "We're working with what we know works."
UAW members approved the concessions in voting ending Monday, with 59% of Ford's production workers and 58% of skilled-trades workers voting for the concessions. At least two local unions rejected the measures.
The changes eliminate cost-of-living increases and performance bonuses of 3% of base earnings in 2009 and 2010. The jobs bank for laid-off workers has been eliminated and sub-pay, used to supplement unemployment benefits, will be limited to a year, depending on seniority.
The combined modifications are expected to result in annual cost savings of $500 million, with half the savings coming from a direct cut in cash benefits.
Ford will also offer a buyout to all hourly employees, except for certain electrician and stationery steam positions.
Operations at Wayne Assembly and Michigan Truck will be combined at Michigan Truck as that facility in Wayne, Mich. is being retooled to make smaller, more fuel efficient cars.
The approved agreement also allows payments to a union-run trust for retiree benefits to be paid in stock. The company is trying to bring its costs in line with slowing demand as it weathers the worst auto sales downturn in 27 years.
Payments to the trust made in stock will have a fixed price of $2 a share in 2009, $2.10 in 2010 and $2.20 in $2.11. Ford would give up the option to make up to 50% of its union-trust payments in stock if the company's shares fall below $1.
Ford is the first to make changes to its UAW contract. General Motors gm and Chrysler have yet to get contract concessions, although they are mandated to make such changes under requirements of federal bridge loans. The agreement is expected to be a model for GM and Chrysler, which have received $17.4 billion so far. The companies are seeking an additional $21.6 billion in government aid.