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Ford’s $6 Billion Deal With United Auto Workers Goes Up for Vote

Keith Naughton and Gabrielle Coppola

(Bloomberg) -- United Auto Workers leaders endorsed a tentative agreement with Ford Motor Co. and sent it to workers for a ratification vote after contract negotiations that lacked the drama surrounding the 40-day strike at General Motors Co.

While the deal calls for the closing of an engine plant in Michigan, it also includes $6 billion of product investments in U.S. facilities and the creation or retention of more than 8,500 jobs. One of Ford’s factories in Ohio will be getting a $900 million infusion for a new product to build in 2023.

The proposed pact now moves on to Ford’s 55,000 hourly U.S. workers, who will be briefed on the deal at plant meetings and vote on it over the next two weeks.

“There was no drama at Ford, so I’m optimistic that the ratification vote will be successful,” said Arthur Wheaton, director of the Worker Institute at Cornell University. “Ford can concentrate on building trucks and making money and the workers can concentrate on keeping working with good pay and benefits. I don’t think Ford overpaid for this contract.”

Highlights of the contract released by the union Friday detail where Ford intends to spend its money and allocate new models over the next four years. The company is also offering a quicker path to permanent employment for temporary workers than General Motors Co. did in its deal.

For ratifying the agreement, Ford workers will receive a $9,000 signing bonus, less than the record $11,000 that GM workers received. But Ford workers didn’t lose wages to a walkout. Four years ago, Ford staff received $10,000 when they ratified the deal, including $1,500 pulled forward from profit-sharing.

Otherwise, the economics of Ford’s package follows the basic pattern set in the GM contract, which includes lump-sum payments and annual pay increases that lift production wages to $32.32 an hour by 2023.

Unlike the GM deal, Ford and the UAW are not planning to close their joint training center in Detroit. Union training centers run jointly with GM and Fiat Chrysler Automobiles have been at the center of an ongoing federal corruption probe that has resulted in several convictions and has implicated UAW President Gary Jones, who has not been charged with a crime. No charges have been filed against anyone in the union’s Ford Department.

Increased Costs

While the contract gives Ford labor peace, it also is expected to increase its labor costs, which were already $11 an hour above what international automakers such as Toyota Motor Corp. and Honda Motor Co. pay workers at their U.S. plants.

GM’s labor costs are projected to rise $100 million a year just due to increases in worker pay, according to RBC Capital Markets analyst Joe Spak. That doesn’t even account for the cost of continuing the union’s generous health care coverage -- a tab Ford expects to rise above $1 billion next year.

But avoiding labor disruption will help Ford Chief Executive Officer Jim Hackett keep his $11 billion global restructuring on track, which analysts and credit rating agencies have said is moving too slowly. Last month, Ford cut its profit projection for the year by $500 million, citing unexpected “headwinds.”

“Ford gets more flexibility in this contract, which will allow them to expand into electric vehicles,” Wheaton said. “Having $2,000 less in the ratification bonus helps Ford save cash, but workers also did have the expense of 40 days on the picket line.”

To contact the reporters on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net;Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

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