UAW Chief Gettelfinger agrees to deal saving Ford up to $4.5 billion.
Ford Motor Co. could save billions in much-needed cash as the result of a new agreement with the United Auto Workers Union.
The union has agreed to let Ford cover half of the $9 billion it owes an employee health care fund, known as a VEBA, using stock, rather than cash. That frees up money Ford needs for its day-to-day operations during the ongoing economic downturn.
The agreement is significant, since Ford has chosen to go it alone, rather than seek a federal bailout, unlike its cross-town rivals, General Motors and Chrysler. But those two struggling makers are expected to use Ford’s settlement with the UAW as a model for their own plans to fund the union-run trust.
“We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value,” Ford spokesman Mark Truby said in a written statement.
As TheDetroitBureau.com previously reported, Ford – like GM and Chrysler – has already received numerous other concessions, in recent weeks, that are expected to save significant amounts of cash, while also improving factory floor efficiency. In the long-run, these changes could effectively close both the cost and productivity gaps between Detroit’s Big Three and the “transplant” assembly lines operated by rivals like Toyota and Honda.
Among other things, the union has already agreed to eliminate the Jobs Bank program that kept workers displaced by technological improvements on the payroll, while a cap has also been placed on a supplemental unemployment benefit, or SUB fund, program, that guaranteed laid-off workers up to 70 percent of take-home pay.
“This (latest) agreement reinforces our view that Ford will likely benefit from any labor concessions provided to GM by the UAW,” said analyst Rod Lache, of Deutsche Bank, in a written analysis.
GM and Chrysler are required, by the terms of the federal bailout, to seek concessions from the UAW, but the union has agreed to negotiate similar givebacks with Ford, in order to keep that automaker equally competitive.