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Ford likes the look of proposed contract


Chairman says automaker interested in health care fund


October 4, 2007

BY SARAH A. WEBSTER

FREE PRESS BUSINESS WRITER

Ford Motor Co. Executive Chairman Bill Ford indicated on Wednesday that leaders at the company founded by his great-grandfather are generally satisfied with the tentative contract rival General Motors Corp. reached with the UAW.

It is expected to serve as a pattern for the Ford deal.

"The broad framework is certainly something we can work with," Ford told journalists during an appearance in Chicago. He was there for a ceremony to start a national network of community-based high schools, which is being supported by the automaker.

Ford spokesman Mark Truby confirmed the comments, which were first reported by Dow Jones, although he emphasized that the company still is studying the deal.

Ford and crosstown rival Chrysler LLC agreed to an indefinite extension of the current contract after GM was named a strike target Sept. 13.

GM and the UAW reached a deal Sept. 26 after a two-day strike, and the union's 73,000 members at GM continue voting on the proposed contract.

The UAW is expected to resume talks with Ford and Chrysler when the GM-UAW tentative contract is ratified.

Bill Ford, who learned labor relations early in his career from former Vice Chairman Peter Pestillo, seems to have good relations with UAW President Ron Gettelfinger, who started his career at a Ford factory in Louisville, Ky., and was head of the UAW's Ford division prior to leading the entire union.

During his Chicago trip, Ford said the company is "very prepared to get going" in talks.

He also said that the automaker is interested in talking to the union about a voluntary employee beneficiary association, or VEBA. That form of union-supervised trust to manage health care for UAW retirees is set to save GM about $20 billion from its $50 billion in related liabilities.

J.P. Morgan Chase estimates Ford's UAW retiree health care liability at $22 billion, indicating possible savings for Ford of $9 billion from a GM-style VEBA.

Bill Ford's comments were notable in that they contrasted with industry experts' recent comments that Ford may need more -- or significantly different -- concessions than those GM won from the UAW.

For Ford, the specifics of the GM agreement could force it to provide greater clarity about its turnaround plan, which aims to make the North American division profitable by 2009, Arthur Wheaton, a labor expert from Cornell University, said last week. Ford lost $12.6 billion last year and is undergoing a restructuring.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said he expects that Ford, when it reaches a deal with the UAW, will disclose the six remaining of 16 plants it plans to close as part of its restructuring. Another large benefit of the proposed contract for GM is the savings related to replacing current workers in noncore jobs with lower-paid union members.

But Ford is ahead of GM in outsourcing noncore jobs, said John Casesa, a veteran auto analyst and managing partner of Casesa Shapiro Group LLC.

Over the past two years, the UAW approved what are known as competitive operating agreements at Ford plants that allowed noncore jobs to be subcontracted out at lower pay. UAW Vice President Bob King said that saved $750 million.

Casesa said the UAW will have to give a different deal to Ford and to Chrysler LLC if it wants to help the companies survive.

"Ford's financial situation remains fragile," Casesa said last week. "Because the main feature of the agreement is relief on health care for retirees and GM has the highest active-to-retiree ratio, it's disproportionately better for GM," he said.

GM provides health benefits to more than four retirees and surviving spouses for every active worker it employs. Ford's ratio is two retirees for each active worker, and Chrysler's ratio is about one-to-one.

Contact SARAH A. WEBSTER at swebster@freepress.com.