The tenor of upcoming contract talks between Ford Motor Co and its union will be different from years past, with an emphasis on improving competitiveness and maintaining earnings momentum, Ford Chief Executive Alan Mulally said on Thursday.

Ford, General Motors Co and Chrysler Group LLC will all enter talks with the United Auto Workers union later this summer ahead of the expiration of the current contract in September.

The difference in the environment of where Ford is and where Ford has gone is going to play into this, Mulally told reporters after Ford's annual shareholder meeting in Wilmington.

I'm really looking forward to how do we enhance our competitiveness further, he said. It's a very different dynamic.

Ford, the only U.S. automaker not to take taxpayer money during the financial crisis, reported its strongest annual profit since 1999 last year. First-quarter profit also surpassed Wall Street expectations.

During the shareholder meeting, Chairman Bill Ford said 2011 earnings should increase further thanks to a stronger global economy and Ford's improved lineup of cars and trucks, including its Fiesta and Focus small cars.

If you're not moving ahead you're falling behind, Ford said at the meeting. We're not going to let that happen.

One of Ford's challenges in 2011 is its labor talks. Union officials have said that creating jobs and profit-sharing will be among their top priorities.

In recent weeks, UAW President Bob King has lambasted Mulally's $26.5 million pay package for 2010, calling it morally wrong.

Mulally brushed aside questions about his pay during a session with reporters, saying it was right to tie his pay to performance.

He also turned aside questions on whether he planned to retire. Ford jokingly said the board wouldn't discuss the issue before 2025. Mulally turns 66 in August.

Ford's all-in labor cost is $58 per hour, compared with $50 per hour at non-union foreign automakers, Barclays Capital analyst Brian Johnson said in a research note on Thursday.

In 2007, Ford's labor costs were $71 per hour.

U.S. automakers have closed much of the gap in labor costs with their non-union rivals, but caution will be needed in upcoming negotiations to ensure long-run competitiveness, Johnson said.


The annual meeting, attended by roughly 100, was its shortest ever, at little more than hour. Shareholders who spoke mostly heaped praise on the board for rescuing the company from the brink of bankruptcy and lifting the stock from $1 a share.

Ford stock was trading at $15.20 on Thursday, up 0.3 percent on the day.

Ford is vying to boost the reputation of its luxury Lincoln brand by attracting younger buyers with new vehicles and implementing better standards for customer service.

The automaker is trimming its Lincoln dealer network and asking dealers to improve their showrooms ahead of the launch of new products in 2012.

Mulally said Ford was transforming Lincoln more quickly than it turned around its Ford brand, partly because it was applying the lessons learned from rescuing its namesake business.

You want to look at where the consumers are and also want the stores to be investing to take the consumer experience to the next level, Mulally said.

Ford repeated that the company's financial priority remained on regaining the investment grade credit rating it lost in 2006, which should help it reduce borrowing costs and reach a wider pool of potential investors.

Paying down debt is job one, said Ford. After regaining investment grade status, Ford said, discussions would then include reinstating dividend payments.

Shareholders voted with the company's recommendations on all proposals at the meeting.

A proposal to give one vote to all the company's common stock, which has been repeatedly proposed in recent years, received support from 31.5 percent of the shareholder votes cast, a highwater mark.

The class B stock held by Ford family members has far greater voting power than class A common stock.

Ford said that vote reflected a recommendation for the measure made by Institutional Shareholder Services, which advises big investors such as pension funds.

(Reporting by Tom Hals, writing by Deepa Seetharaman in Detroit; Editing by Ted Kerr)