Ford Workers Agree to Cost-Cutting Plan

Ford will be able to meet up to 50% of its outstanding obligations to a trust fund for retiree health care benefits with common stock instead of cash.

Workers at Ford Motor Co. have ratified cost-cutting changes to their contract and health care benefits, the United Auto Workers union said on March 9. The announcement comes as the government's "working group" on the automobile industry was meeting with the UAW and top managers of General Motors and Chrysler as they try to chart a way to restructure the two companies to avoid bankruptcy.

The UAW said 59% of production workers and 58% of skilled-trades workers voted for the agreement.

A similar deal will likely be made with GM and Chrysler because the United Auto Workers union maintains similar contracts at each of the Detroit Three.

The tentative agreement will allow Ford to meet up to 50% of its outstanding obligations to a trust fund for retiree health care benefits with common stock instead of cash, Ford said. Ford owed $13.2 billion to the fund as of August 29.

"We are focused on doing everything possible to rebuild a great industry and keep manufacturing jobs in the United States," said. "As we have stated many times, in order to succeed, shared sacrifice will be required from all stakeholders, including executives, directors, shareholders, bondholders, dealers and suppliers."

The Detroit Three reached a deal with the UAW in 2005 to transfer responsibility for retiree health care befits to the union by setting up a Voluntary Employee Beneficiary Association (VEBA). Ford said at the time that it would be able to reduce its overall health care liability by five billion dollars as a result of the deal, which it estimated would also produce an average annual net corporate savings of about $650 million.

Copyright Agence France-Presse, 2009

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