Ford Uncertain When Labor Cost-Savings to Kick In

Ford Motor Co.’s 4-year contract with the United Auto Workers union will allow it to close the labor gap with transplant auto makers such as Toyota Motor Corp., but it’s “anyone’s guess” as to when those cost savings will be realized, says the auto maker’s top labor executive.

Under terms of the UAW contract inked late last year, Ford is allowed to pay entry-level hourly wages of about $14.20 to 20% of its union-represented workers. Current UAW employees earn about $30 an hour, excluding benefits.

Ford is offering its 54,000 hourly workers a number of early retirement and buyout packages to make way for new, lower-wage hires.

The timeframe for when the auto maker begins to realize savings from the new 2-tier wage structure depends on how many workers accept the latest buyouts, says Marty Mulloy, vice president-labor affairs, who declines to reveal Ford’s take-rate expectations.

Unlike the UAW contracts negotiated with General Motors Corp. and Chrysler LLC, Ford is not required to identify core and non-core positions to determine who is eligible to receive the lower pay rate, Mulloy tells Ward’s.

“We don’t have that distinction,” he says, adding the auto maker does not expect to make any entry-level hires this year.

The first step to determining how many entry-level workers will be hired, and when, hinges on what happens with the estimated 5,000 Ford workers remaining at Automotive Components Holdings LLC plants.

Ford labor chief Marty Mulloy says no entry-level hires this year.

ACH is composed of orphaned manufacturing plants and other facilities the auto maker acquired from former subsidiary Visteon Corp. in 2005.

Ford wants to sell or shutter the 11 remaining ACH plants by year’s end, Mulloy says. “One of the purposes of the buyouts (is to) make jobs available to those employees.”

ACH workers at plants that are sold have the opportunity to keep their Ford jobs under the new ownership, Mulloy says, noting Ford has seen 1,000 employees flow back from ACH plants in prior buyout offerings, and the transition was “managed well.”

Mulloy says the auto maker has “a pool of people from the outside that are tested and ready to replace ACH employees that elect to return (to Ford).”

The auto maker also plans to eliminate its jobs bank, from which laid-off employees receive most of their pay. Mulloy says approximately 500 workers remain in the program and will either “take a buyout or be placed (in a new facility)” by year’s end.

In the past, such workers could decline job offers that would force them to relocate, but that no longer is the case. “Almost all (offered positions) would require relocation,” Mulloy says, adding Ford expects the “vast majority to take a buyout or relocate.”

Ford is offering its latest round of buyouts for UAW-represented workers in two stages. The first, just completed, involved employees at facilities slated for closure under the company’s ongoing restructuring strategy. They had until Feb. 25 to accept one of 10 buyout packages.

A second stage began Feb. 19 and runs to March 18, with all hourly workers eligible. Separations are to be completed by year-end.

Meanwhile, Mulloy says Ford’s ongoing initiative to source parts in-house, where it makes sense, won’t involve ACH plants.

“We’ve had (in-sourcing) discussions, but nothing directly involving ACH,” he says. “Most product (produced by ACH plants) would be sold to a potential buyer.”

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