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United Auto Workers Strike Tentative Labor Deal With Ford

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10/30/2019 | 09:25pm EST

By Nora Naughton

The United Auto Workers said Wednesday it has struck a new tentative labor deal with Ford Motor Co., as union bargainers look to move quickly to wrap up contract talks following a 40-day strike at General Motors Co.

The proposed agreement, which still must be ratified by Ford's UAW-represented workers, clears the way for the union to turn attention next to negotiations with Fiat Chrysler Automobiles NV, which labor experts and industry analysts expect to be thornier with the car company pursuing a merger with France's PSA Group.

The UAW didn't disclose terms of the Ford deal, saying it will first present the details to union-hall leaders from Ford's U.S. factories in the coming days. UAW Vice President Rory Gamble, the union's lead bargainer with Ford, said the new contract secures $6 billion in factory investments and creates or retains more than 8,500 jobs.

Ford in a statement confirmed it had reached a tentative deal with the UAW.

Union bargainers headed into Ford talks Monday using the agreement struck with GM earlier this month as a template, looking to reach similar terms on wages and benefits for Ford's 56,000 union-represented factory workers in the U.S.

The GM contract gives the company's workers better pay, it provides more job security for temporary workers, and it preserves health-care contributions at 3%, a rate far lower than the average for other private-sector employees.

Ford entered into talks this time around looking to clamp down on health-care costs, which are on pace to top $1 billion next year. Those hopes appeared to dim when details of the GM contract were first revealed and included no increase in employees' out-of-pocket health-care expenses.

The Dearborn, Mich., auto maker already has the second-highest labor costs of the three Detroit car companies, spending an average of $61 an hour on wages, benefits and other expenses for the company's unionized workforce, according to the Center for Automotive Research. Fiat Chrysler spends $55 an hour.

Ford, the No. 2 U.S. auto maker by sales, is in the midst of a broad restructuring to boost profitability. Chief Executive Jim Hackett's turnaround effort includes plant closures in Europe and South America, as well as layoffs and buyouts of more than 2,000 salaried workers in North America over the past year.

Both Ford and Fiat Chrysler are likely to confront higher labor costs if the UAW is successful in matching the gains won at GM.

Analysts estimate the new GM contract, covering more than 46,000 UAW-represented workers, will increase labor costs by roughly $350 million a year at the end the contract's four-year term.

In exchange, GM got more flexibility to pare back its U.S. manufacturing operations, including closing three factories that had been underused and a drag on profits.

That victory won't have as much impact at Ford and Fiat Chrysler, where executives aren't as pressed to close plants and are instead looking for cost savings in other areas to offset any labor-cost inflation, say people close to the talks. Ford is also in a weaker position financially and has a far bigger union-represented factory workforce than GM, so any added expenses from this contract will make a deeper dent in its earnings.

For instance, GM's operating profit in the first nine months of this year was $8.3 billion versus $5.9 billion at Ford for the same period.

Contract talks with Fiat Chrysler are expected to be more complicated. The U.S. car company, the smallest of the three Detroit car companies, has a newer workforce with many factory employees earning far less than the top pay of about $30 an hour.

Changes to new-hire pay, which shorten the period it takes for workers with less seniority to reach full wages, and a path to full employment for temporary workers are likely to be more expensive at Fiat Chrysler than at its Detroit peers, labor experts say.

Fiat Chrysler's merger with PSA Group will only further convolute talks with the UAW, adding to uncertainty about the company's future structure at a time when profitability across the auto industry is under pressure and manufacturers are confronting slowdowns in three of the world's largest car markets: the U.S., China and Europe.

Fiat Chrysler's U.S. unit has already changed hands three times in the past two decades. A completed merger deal with PSA would represent a fourth.

Stocks mentioned in the article
ChangeLast1st jan.
FIAT CHRYSLER AUTOMOBILES -0.86% 13.148 End-of-day quote.4.57%
FORD MOTOR COMPANY -0.11% 9.01 Delayed Quote.17.78%
GENERAL MOTORS COMPANY -0.45% 35.38 Delayed Quote.5.77%
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Sales 2019 146 B
EBIT 2019 5 567 M
Net income 2019 2 105 M
Finance 2019 7 233 M
Yield 2019 6,66%
P/E ratio 2019 17,6x
P/E ratio 2020 8,88x
EV / Sales2019 0,20x
EV / Sales2020 0,21x
Capitalization 35 724 M
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