Ford Motor Co and the United Auto Workers union said on Tuesday they had reached a tentative four-year contract that would allow the automaker to invest almost $5 billion in U.S. plants and create an additional 5,750 jobs.
UAW workers at Ford will receive at least $16,000 in bonuses over the life of the deal, which includes early retirement offers for veteran workers and plans to shift some assembly work from Mexico. The bonuses and buyouts were more generous than those offered by General Motors Co.
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, said UAW President Bob King.
Ford declined to comment in detail on how the agreement would affect fixed costs.
We're very pleased that it will improve our competitiveness here in the United States, John Fleming, Ford's head of global manufacturing, told reporters.
GM previously said its UAW deal would have minimal impact on profits.
The union council representing Ford plants voted overwhelmingly to approve the deal, and it must now be ratified by the 41,000 UAW-represented workers, something union officials expect by October 17.
Ford shares were up 3.2 percent at $9.67 on Tuesday afternoon after earlier falling to a two-year low.
Ford said on Tuesday it will create or preserve 12,000 U.S. hourly jobs by 2015 if the deal is ratified.
That total includes 7,000 jobs previously announced by Ford, including 750 white-collar positions. The majority of the additional 5,750 jobs to be added will be at entry-level wages, the company said.
The UAW said separately that many of the new jobs would be added by the end of 2012.
Six percent of Ford's hourly workers earn entry-level wages, which start at $15.50 and average just under $17 an hour. Traditional nonskilled UAW workers at Ford earn an average of just over $28.
By comparison, the U.S. minimum wage is $7.25 an hour.
While the number of new jobs announced was slightly less than the more than 6,000 agreed to by GM, the Ford contract represents a good deal in a bad economy for the union, said Harley Shaiken, a labor expert at the University of California, Berkeley.
That's more jobs than the whole country created in August, said Shaiken, who also is a confidant of the UAW's King. It's a significant deal in an iconic industry.
Ford can afford to add those jobs because it will help bring down the average cost of overall hourly compensation, said Kristin Dziczek, a labor analyst at the Center for Automotive Research.
If Ford could match the ratio of entry-level workers at Chrysler -- bringing the share to 12 percent from 6 percent -- it would cut average hourly compensation costs by $4 to $54, she said. UAW officials said the deal will make Ford competitive with the U.S. plants owned by foreign automakers.
Ford pledged that if the contract is ratified it would invest $16 billion in the United States, including $6.2 billion in its own plants. Of that latter amount, almost $5 billion had not been previously announced, Fleming said.
Unlike GM and Chrysler, Ford did not undergo a federally funded bankruptcy and bailout in 2009, and Ford's hourly workers have said they expected a richer deal than one ratified last week for 48,500 GM workers.
The Ford deal includes at least $16,000 in bonuses over four years, more lucrative than the $11,500 minimum GM workers will receive over the life of their deal.
The Ford contract also has buyout offers of $50,000 for veteran production workers and $100,000 for skilled trades workers who retire by the end of March. At GM, those buyout offers were $10,000 and $75,000, respectively.
Ford's skilled trades workers also can take $50,000 and switch to a lower-paying traditional production job.
Ford also will shift some assembly of the Ford Fusion sedan to its plant in Flat Rock, Michigan, from Mexico, and add a second shift of workers at the U.S. factory.
King called the two deals very comparable, but added that the higher payments for early retirements at Ford made sense given the company's stronger finances.
Credit ratings agency Standard & Poor's said last week that it could raise Ford's credit rating if a new labor deal with the UAW allowed the automaker to remain solidly profitable in its home market and kept it competitive with GM.
Jimmy Settles, the UAW vice president in charge of the Ford talks, said a grievance filed by UAW workers against Ford was not a part of the proposed agreement, but a settlement was expected some time in November. The grievance says Ford gave pay increases to its salaried workers, but not similar increases to its hourly work force.
A ratified contract at Ford will allow the UAW to focus on Chrysler Group LLC, the weakest of Detroit's three automakers and where analysts expect negotiations to be tougher.
Chrysler, majority-owned by Italian automaker Fiat SpA, has about 23,500 UAW-represented workers. Sergio Marchionne, chief executive of both Chrysler and Fiat, is under pressure to hold the line on costs.