Pact To Bring Ford's Labor Costs More In Line With Toyota's

As Originally Posted to The Wall Street Journal

Ford Motor Co. expects to cut its hourly labor costs to the levels of Toyota Motor Corp. and other foreign rivals with U.S. plants in two years thanks to union contract changes ratified this week.

The concessions, which trim benefits, change work rules and eliminate some pay increases, could save Ford as much as $375 million this year and $500 million or more in subsequent years, company officials said Wednesday.

The new terms cover 42,000 Ford workers represented by the United Automobile Workers. The agreement intensifies pressure on General Motors Corp. and Chrysler LLC, which need labor concessions by month's end to meet the terms of emergency U.S. government loans. (For other auto news, please see page B3.)

GM will get many of the same concessions as Ford although some terms will be different, UAW Vice President Cal Rapson wrote union members in a March 9 letter. The letter, a copy of which was reviewed by Dow Jones Newswires, didn't provide specifics but Mr. Rapson said the "economic" elements will follow the pattern set by Ford.

GM and Chrysler, which together have borrowed $17.4 billion from the U.S. Treasury and seek as much as $21.6 billion more, remain at odds with the UAW over retiree health-care funding.

Although Ford hasn't sought government loans, it opened parallel talks with the UAW, bondholders and others to keep its costs competitive. Last week, Ford announced a plan to cut its debt by $10.4 billion by offering cash and stock for bonds and other debt.

Under the new UAW terms, Ford said it will pay compensation of about $55 a hour, including benefits, pensions and bonuses. That's down from about $60 and moves Ford closer to the estimated $48 an hour Toyota and other foreign auto makers pay employees at their U.S. plants, said Ford's group vice president of global manufacturing, Joe Hinrichs.

Over the next two years, Ford should lower the rate further as it is allowed to replace retiring workers with new hires costing about $30 an hour. The auto maker says it expects to bring its rate down to $50 by 2011.

As part of its UAW accord, Ford will make a new buyout offer to hourly workers on April 1. The offer will be worth less than previous programs because of the economy, Mr. Hinrichs said. Details will be released next month.

Meanwhile, members of the Canadian Auto Workers union have voted 87% in favor of a cost-cutting contract with GM, helping to qualify the struggling automaker for government aid.