The vote means that new contracts have been approved at Ford and General Motors Co., with Chrysler workers just starting to vote on their deal. At all three companies, the union agreed to profit sharing and signing bonuses instead of annual pay raises, a novel concept that helps the companies control their costs yet rewards workers.
Most workers won’t get annual raises under the contract, but they will get profit-sharing checks, inflation adjustment payments and other bonuses worth at least $16,700 through 2015. The deal at GM was similar, but the Chrysler pact has far smaller signing bonuses and profit-sharing checks.
UAW Vice President Jimmy Settles, the union’s top Ford negotiator, said in a statement that workers at Ford were frustrated with the economy, a lack of pay increases and what he called “outrageous” pay packages for executives, yet they still approved the pact. Eighty-five percent of the union’s members at Ford cast ballots, he said.
“As the nation’s economy remains stalled and uncertain and its employment rate stagnates, we were able to win an agreement with Ford that will bring auto manufacturing jobs back to the United States from China, Mexico and Japan,” union President Bob King said.
Despite the signing bonuses and profit-sharing, analysts expect a minimal impact to Ford’s labor costs, in part because most of the new workers will be hired at lower wage rates than the company’s longtime workers. Brian Johnson, an auto analyst with Barclays Capital, estimates the contract will add around $70 million to Ford’s labor costs each year. If large numbers of older workers leave the company, Ford will spend even less, he said.
Johnson said Ford could see immediate benefits from the union approval in the form of a ratings upgrade, which would help lower its borrowing costs. Standard & Poor’s Ratings Service has said it expects to raise Ford’s corporate credit rating to “BB+” — which is one notch below investment grade — if the labor agreement is ratified.
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