UAW OKs cuts that will save Ford millions
New deal may establish a pattern for GM, Chrysler
BY BRENT SNAVELY • FREE PRESS BUSINESS WRITER • March 10, 2009
Ford Motor Co., seeking to survive without federal aid, gained breathing room Monday as it became the first domestic automaker to gain a new round of concessions from the UAW after its members ratified an agreement that cuts their compensation package.
The new deal, which will easily save Ford millions of dollars, is expected to set a pattern for General Motors Corp. and Chrysler LLC.
"This is about the biggest the stakes could possibly be," said Gary Chaison, professor and labor expert at Clark University in Worcester, Mass.
Ford posted a record loss of $14.6 billion in 2008, and industry conditions have been even worse this year. Sales of the Dearborn automaker's cars and trucks dropped 48.5% in February.
With the ratification agreement, Ford further distinguishes itself from GM and Chrysler, which have received $17.4 billion in federal bridge loans and are still in talks with the UAW to agree on a final amended contract.
Shared sacrifices
In exchange for cuts, Ford made commitments to the UAW to seek sacrifices from its executives, salaried employees and bondholders.
On Feb. 23, Ford said Chief Executive Officer Alan Mulally and Executive Chairman Bill Ford Jr. would take 30% salary reductions this year and next. Ford also noted in a letter to the UAW that it has shed half of its contract workers over the past three years.
Meanwhile, Ford and Ford Motor Credit last week announced that they are offering bondholders a total of $2.2 billion of cash, plus some stock, to induce them to retire up to $10.4 billion of its debt. For the majority of the bonds, bondholders would receive about 30 cents on the dollar.
Shelly Lombard, a bond analyst for Gimme Credit, said bondholders will likely consider that offer on its merits, without much regard to the UAW deal. |
