Ford takes $600 million charge on UAW contract

Ford takes $600 million charge on UAW contract

Signing bonuses in line with company expectations.

December 1, 2015

Dearborn, Michigan – Ford Motor Co. will take a $600 million charge against its fourth quarter earnings following the passage of its new four-year labor contract with the United Auto Workers, mainly to pay signing bonuses for employees.

Company officials say the charge is in line with guidance they gave earlier in the year.

“This agreement enables us to further strengthen our business and continue investing in manufacturing in the U.S.,” says Mark Fields, Ford president and CEO. “At the same time, the agreement aligns our labor cost structure more closely with our competition and improves our manufacturing productivity and staffing flexibility.”

The terms of the new agreement provide Ford with several opportunities to improve its overall productivity, including:

  • An end to a cap on entry-level employees
  • Improved ability to use temporary workers
  • Use of alternative work schedules, along with additional daily and weekly mandatory overtime
  • Flexibility to leverage Ford’s global manufacturing footprint to improve cost competitiveness for products the company may sell in North America
  • Maintaining the current Supplemental Unemployment Benefit agreement, which allows Ford to remain competitive in a downturn

The new agreement also puts Ford on common footing with its domestic competitors regarding overall labor cost structure. During the four-year contract period, the agreement effectively closes the labor cost gap to General Motors and substantially narrows the gap to Fiat Chrysler Automobiles.

Overall, including the ratification and lump sum bonuses, Ford’s U.S. labor costs will increase by less than 1.5% a year, which is less than the company’s present forecast of inflation over the contract period.

The company also has committed to investing $9 billion in its U.S. plants and expects to create or secure 8,500 hourly U.S. jobs in communities across Michigan, Illinois, Kentucky, Missouri, New York, and Ohio. The jobs will support production of the all-new Ford Super Duty, F-150 Raptor, Lincoln Continental, and several new powertrain technologies.

The agreement covers approximately 53,000 UAW-represented employees in the U.S. It builds on the 2011 Ford-UAW labor agreement, in which Ford pledged to create 12,000 new U.S. jobs. The company exceeded that commitment by adding more than 15,000 hourly jobs between 2011 and 2015 and investing $10.2 billion in the company’s U.S. plants.

Source: Ford Motor Co.