Ford Motor Co. said its total annual labor expenses will increase less than 1 percent over the four-year term of its new contract with members of the United Auto Workers union.
The contract's lump-sum payments to workers, including a $6,000 bonus to be paid to each of Ford's 41,000 UAW workers for ratifying the contract, will cost Ford $280 million this year, company officials said on Thursday in a presentation to analysts. The bottom-line impact of lump-sum payments will be $80 million this year and about $80 a year in each of the next four years, the company said. Other changes and benefits in the contract will lower Ford's labor costs by $10 million this year and $20 million next, Ford said.
Costs of the contract will "be more than offset by improvements in manufacturing flexibility," said Mark Fields, president of the Americas for Ford.
Changes include adding flexibility to plants and other steps to increase productivity, according to The Wall Street Journal. Structural costs are not anticipated to increase materially over the period of the contract, said Lewis Booth, the chief financial officer.
Ford plans to hire 12,000 new workers over the course of the contract. If U.S. sales of vehicles stays at current levels or increases slightly, Ford said it still plans to hire most if not all of the workers based on the current need, Mr. Fields said. Ford's 41,000 hourly workers ratified a new four-year contract this week with 63 percent vote in favor of the contract.
Ford was the most vulnerable of the three Detroit auto makers because its previous contract didn't have a "no strike" clause that was included in contracts held by General Motors Co. and Chrysler Group LLC.
Ford said it will invest a total of $16 billion in the U.S.—$6.2 billion directly in plants—through 2015. It also raised the entry-level and top-end wage for newly hired workers, a key goal of the UAW to begin to close the gap in wages between long-time employees and new ones.
Ford is planning to buy out skilled tradesmen for as much as $100,000 a worker. Ford said it would like to reduce the number of tradesmen by between 900 and 1,000 from the 9,000 it now has, said John Fleming, group vice president of manufacturing and labor affairs.
Mr. Fleming told analysts that by the end of 2015, Ford's U.S. work force would be composed of around 8 percednt of so-called "second-tier" workers who make a lower starting wage.