Ford Motor Co said on Wednesday that it expected operating savings of $500 million per year from an agreement with the United Auto Workers that will push hourly wage rates into the ballpark of foreign-based rivals.

The agreement with the UAW, which workers ratified earlier in March, allows Ford to suspend some performance and bonus payments, reduce overtime costs and cut a paid holiday, as well as restructure funding of a union retiree healthcare trust.

Joe Hinrichs, Ford's global head of manufacturing, said the savings from the operating agreement and restructuring of the funding of the trust, a Voluntary Employee Beneficiary Association, was critical to our future competitiveness.

The annual savings could exceed $500 million if industry conditions allow Ford to exercise all of the changes in the agreement, Hinrichs said in a conference call with analysts and reporters.

Ford, which posted a record $14.7 billion net loss for 2008, has said it believes it has adequate liquidity to operate through the economic downturn without seeking emergency U.S. government loans.

(Reporting by David Bailey; Editing by Lisa Von Ahn)

Manufacturing Ford Motor Company