• Mar 12th 2009 at 11:29AM
  • 64
Two years ago when Ford was negotiating a new contract with the UAW, the automaker was paying its union workers the oft-bandied amount of $70 per hour. That amount wasn't the actual hourly wage of each employee, though, but rather the employee's hourly wage plus the cost of contributions to current and future benefits for retirees and workers still with the company. Now, due to a newly signed agreement with the United Auto Workers union, Ford projects that total cost per worker will go down to $55 per hour.

That puts The Blue Oval only about $5 away from the total hourly compensation paid by transplanted automakers like Toyota and Honda to their non-union workers. Among measures such as cutting overtime, bonuses, cost-of-living increases, and one paid holiday, Ford reworked its contribution to the VEBA account that will fund retiree healthcare so that it can pay into it with stock instead of cash, the total savings of which could add up to $500 million per year.

Intriguingly, it was remarked that "Ford's deal with the UAW appeared to meet the cost savings targets set out by the Treasury Department for its aid to GM and Chrysler," yet Ford is the one that didn't take government money and so, technically, is the one automaker not compelled to meet those targets. General Motors and Chrysler have also made new agreements with the UAW, but details have yet to be released.

[Source: Reuters, Photo by Larry W. Smith/Getty]

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    • 1 Second Ago
      • 6 Years Ago
      Can any of you HS drops outs actually read or comprehend what you read?????
      The $55.00 INCLUDES what the company pays in costs for RETIRED workers for their pensions and health care benefits for already RETIRED workers.
      The article very CLEARLY states "they do not earn that amount per hour."
      The labor cost to build any vehicle Ford, Honda etc. is just 10% of the price of the vehicle. The other 90% of the cost are: Materials, cost of buildings, cost of machines and tools, heat, electricity, advertising costs, telephone costs, design costs, warranty repair costs, law suit costs, recall costs, real estate taxes and the list goes on and on. Even if every auto worker working for Ford, Honda etc. all worked totally for FREE it would only lower the cost of producing vehicles by 10% of their selling price.
      One thing is sure: The more people there are who take pay cuts and work for less money then the less they will spend and the worse the economy will get. Creating more poorer workers is not going to help anyone.
      • 6 Years Ago
      Joe: "How are Ford workers being paid by the US taxpayers when Ford did not accept any federal loans, as GM and Chrysler did?"

      Because the taxpayers are paying to keep the credit markets operating and 97% of Ford's customers don't pay with cash.

      Subsidizing the company is one part of the equation, subsidizing the consumer is the other.

      • 6 Years Ago
      This is good for both Ford and the UAW. The reasons this is good for Ford are obvious.

      For the UAW, they are getting VEBA payments via Ford stock which is trading at around $2 a share. Assuming they can get back to the $10 a share level they were running at since the late '80s (with a serious boom to the mid $30s between about 98 to 01) that'll equal a huge increase in the value of the VEBA.

      Now was a good time for the UAW to agree to the stock deal. As for GM... i don't know if i would want their stocks. I don't know what Chrysler would offer.
        • 6 Years Ago
        I have no idea where my posts are disappearing to, but GM made a deal several years ago to shift VEBA payments to the UAW starting in 2010. It does require an up front payment (funding) to the UAW that GM seems unlikely to be able to come up with.

        I think I'm getting nailed for posting links, so I'll include a little text here.

        'Under its 2007 contracts, the UAW and the domestic automakers agreed to create a retiree health care trust fund that the UAW is scheduled to begin managing Jan. 1. The automakers were expected to put about $46.1 billion into the VEBA over time, ridding themselves of about $88 billion in estimated future health costs at a substantial discount.'
        • 6 Years Ago
        GM made a deal to transfer the VEBA obligations to the UAW in 2010. They did this several years ago. It requires something like a $30B one-time payment, and GM is unlikely to find the money by then.
      • 6 Years Ago
      Good on Ford.
      • 6 Years Ago
      Just another reason why you only see Ford products in my driveway these days. Only a few years ago, it was all GM in my driveway. Declines in both product and customer service changed that pretty quick. Nowadays, there's few GM vehicles I'd even consider owning.
        • 6 Years Ago
        Oops! Sorry, double-posted.
      • 6 Years Ago
      Good for Ford. Let's see, they've improved their vehicle quality, AND reorg'd their cost structure without gov't cheese?

      Why, it's almost as if gov't intervention makes things more difficult...
      • 6 Years Ago
      Good for Ford.

      But Ford requested $11B in government bailout money "for efficient vehicles". Remember? So the 'Ford is the one who didn't take government money' is only true until those monies are approved and distributed.

        • 6 Years Ago
        Not part of the TARP money doesn't mean it isn't government (taxpayer) money.

        Just because Nissan is asking for it too doesn't mean it isn't government (taxpayer) money.

        Ford has asked for government money to continue their business and restructure in these difficult times.
        • 6 Years Ago
        That's a BS argument.

        They didn't ask for the money to become more solvent, they asked for the money to help them develop the cars that the US government seems to be pushing on them and on the US consumer. The government wants you and me to give up our inefficient vehicles and drive tiny cars with 1.2L motors that get 60 MPG and offer zero utility. Ford simply asked them for assistance with the development of technologies to meet those demands/regulations.

        They don't need the money to operate, like GM and Chrysler do.
        • 6 Years Ago
        That money is part of the Energy Independence Act which I believe
        Nissan has also applied for a portion of as well. It is open to any
        automaker and is not part of the TARP money.

        Ford has its act together and are making a good go of it in this
        rough market. They will instantly qualify for any real bailout cash
        if the worst case scenario was to take place. Respect to Ford for
        giving it all she's got!
      • 6 Years Ago
      $55/hr is still buII$h!t. so what if wage = labour + pensions + health care + union dues + blah blah blah. that is still a substancial amount. i am amoung one of the average citizens making only $15 wage. so my wage ($15) = labour + pensions + health care - union dues (cuz i'm not in a fugging untion xD). and yes, i graduated from college trying to make a living. i have a wife to support, baby is on it's way to this world. wife making $12/hr and that's a total of $27 combined salary before government taxes. so what fugging good UAW/CAW anyway? i think i can answer that. cuz everyone is too fugging stupid to realize unionizing is a fugging burden to a company. and don't blame the white collars.
        • 6 Years Ago
        Twenty-Five years ago I got a non-union job as a part-time paralegal making $12/hour. I left it five years later being paid $21/hour with adjustments for third shift work (the law firm operated 24/7, 365).

        Today that $12/hour wage, adjusted for inflation would be $22/hour. You make $15. Maybe if you were in a union you'd be making more.
        • 6 Years Ago
        @davido: Maybe if he was in a union, his company would be close to bankruptcy (even with government handouts), and he and his co-workers would have little to no job security.
      • 6 Years Ago
      As far as I'm concerned they're being paid by the taxpayer and not Ford.
      The union bosses have the democrat leadership in their back pockets.$55 per hour is too much for the taxpayer to fund.If it was Ford's money it would be OK but it's not.Where's the pressure from the Dems?Hey no pressure at all.The unions keep 'em in power.
        • 6 Years Ago
        Jay Evans:
        You're right about accounting rules. These figures are not being calculated using accounting rules. They are being calculate in a way either to measure cost-efficiency of the companies or in a way to make the most exciting headlines, depending on how cynical you are.

        Either way, this figure that people are talking about lowering does include the costs of retired workers in the cost of production of a car.
        • 6 Years Ago
        Joe.You're right.They haven't.I'm just a pissed off taxpayer who's had enough.
        The $55 per/hour figure will have to be lowered when the UAW negotiates with GM as THEY ARE accepting taxpayer dollars.
        • 6 Years Ago
        Despite the messed up headline, the union workers are not being paid $55/hour.

        This includes money to pensions and health benefits for retired workers. They add to the total labor cost, but do not actually raise the hourly wage earned by the workers on the line. Furthermore, if GM and Ford were to close today, these obligations would not go away.

        These obligations are to workers who worked at GM 30 years ago. And the reason Toyota has lower overhead on hourly production costs is not because they are so damn smart, but because they didn't employ any significant amount of workers in the US (and far fewer worldwide too) 30 years ago.

        It's a big problem. The UAW successfully extorted unsustainable benefits from the big 3 over the last 30 years. And the big 3 acceded to them, under threat of their companies being shut down. But those do represent good faith promises from the big 3 to workers, that the government is now insisting that the companies break these promises. I know it's needed for survival, but if I were on the receiving end of this pain, I know I'd be unhappy too and feel like my company betrayed me. This could end up strengthening the UAW further.
        • 6 Years Ago
        ...You want to see what Ford and Gm are going to be like in a few years?Visit the story on "Cobo Hall" in Detroit.It's what happens when unions and Dems take over.
        • 6 Years Ago
        @why not the LS2LS7?
        "This includes money to pensions and health benefits for retired workers."

        If you check, I think your find that is not the case. Often repeated, just not true.

        Due to accounting rules, retired workers' benefits are not counted in the cost of a present worker for the company.

        His pay and his promised future benefits are, but not the cost of past employees. The cost of a retired worker's benefits were accounted for while they were employed.
        • 6 Years Ago
        jc, are you a proponent of publicly financed elections? Your post would seem to indicate so.
      • 6 Years Ago
      Even though Mullay is not a car guy, he seems to have done the best among the big three executives. Bill Ford was humble enough to realize that he could not turnaround Ford by himself.
      • 6 Years Ago
      Good Job Ford!
        • 6 Years Ago
        Big Rocket, Yes the cut will help Ford. But that may force some of the best blue color folks to look for a different job, that pays at least what Ford used to pay. Therefore production will suffer.

        Also, i read that newly hired employees get something like $14 an hour, compared to $25+ in the old days (few years ago). I am trying to say you are not getting the same talent at 14 as you do at 25.
        • 6 Years Ago
        Sea Urchin, You make absolutely no sense - "you get what you pay for" how !@#$%^ing stupid can a person be! We over pay the UAW and get sh^t quality for years and then renegotiate their livelihood to survive at a "fair" wage while Ford's quality is getting better every day! You are just stupid!
        • 6 Years Ago
        Sea Urine,
        As usual you are making little sense.
        1. You say "I agree" to Ford doing a good job getting wages down.

        2. You then say.."but you get what you pay for."

        So one may infer that you feel Ford should be paying more for higher qualified workers to put on lug nuts or one can infer that you thought they were overpaid and now more in line with what they deserve. Your statements are contradictory.

        Also $55 an hour is still more than the transplant workers and you have gone on record many times with your love of the imports. So does Toyota also get what they pay for?

        ...anyway I am glad to see this concession to help Ford moving forward and remain competitive.
        • 6 Years Ago
        "Agree, but never forget that you get what you pay for."

        Indeed. Which is why if U.S. autoworkers are used to a certain living standard at $70 an hour and their Korean counterparts do the same job for half that, you can expect to find Korean cars having enough margins to build more retained profit over a period of time to inject more quality in the product - while still having enough room to maintain an attractive price point. That makes the U.S. equivalent uncompetitive and unattractive.

        Earning high incomes en masse is one thing, but for businesses to pass those costs on to consumers and for consumers to actually accept them is quite another. Americans have always wanted cars as inexpensive as possible, but they also simultaneously want high incomes. It's a self-defeating equation and just one of a number of core reasons why the U.S. economical bubble has burst so spectacularly.
        • 6 Years Ago
        @Sea Urchin: What's that supposed to mean? If you are saying Ford cheaped out on labor costs, so their cars are going to be more craptastic than ever, remember Ford's labor costs are still $5/hr higher than at Toyota or Honda.

        On a related topic, it took the near bankruptcy of the Big 3 for the UAW to bring down labor costs from a 40% disadvantage to a 10% disadvantage. What is it going to take to get rid of the remaining 10% disadvantage?

        Note on union vs non-union labor, both in the US:
        ($70 - $50) / $50 * 100% = 40% higher labor cost
        ($55 - $50) / $50 * 100% = 10% higher labor cost
        • 6 Years Ago
        @Sea Urchin

        I think the majority of your problem posting on AB is that you type as if what you say is fact when it's your opinion, inferences and theory!

        The FACT is that with jobs down, people losing their shirts I don't see anyone going "Hey I'm only making 55 bucks an hour right now (or the equiv with healthcare etc) so I'm gonna go look somewhere else". The smart person is going to bunker down and ride out the storm till they have to make a move! And if you're making 10 bucks less (per capita) down at Toyo and everyone across the industry is taking the cut to bring them to realistic income levels, then guess what............. There's nowhere to go!

        So friend! Pick your head up out of the water!

        By the way, is Lochness real?
        • 6 Years Ago
        Big Rocket:
        I'd be shocked if the last 10% disappeared in negotiations. It's not so much because of any structural issue but because Toyota doesn't have any significant number of retired workers on the books collecting health care or pensions.

        The 10% will disappear as older workers who retired with higher benefit levels from the big 3 die off and as Toyota's number of retired workers rises, which is inevitable for any aging company like Toyota.
        • 6 Years Ago

        "It's a self-defeating equation and just one of a number of core reasons why the U.S. economical bubble has burst so spectacularly."

        To clarify, I read your post again. I agree with everything you said until you stuffed in the backhand at the bottom.

        It may be a contributor but it is not a core reason. Maybe your point is just not clear.

        • 6 Years Ago
        Well there is a new theory that flies in the face of the conventional wisdom of what caused the current financial situation. You know, forget all the sub prime mortgages, credit default swaps, loss of liquidity, housing correction, etc. Yeah, forget all that, it was the American auto industry and overpriced factory workers, and American consumers that caused the whole problem. Well, actually it was American consumers that caused the problem, but not with directly tied to Autos. More to do with living outside of ones means.

        However, your theory does not makes little sense at best. Toyota, Honda, and Hyundai all build cars in the US and Canada and pay less than the UAW, yet still manage to build higher quality and better value cars. American do want the most car for the money..what is wrong with that - it is called value. The Domestics have lots of problems and overpay for workers in one of them.

        So which firm laid you off? PWC, Deloitte, KPMG, E&Y? You are so filled with vitriol for Americans that it there must be a root cause.
        • 6 Years Ago
        Agree, but never forget that you get what you pay for.
        • 6 Years Ago
        Sea Urine,

        Where are they going to go?

        Toyota? Nope - they pay less

        Honda? Nope -they pay less

        Hyundai? Nope- they pay less

        BMW? - Nope- they pay less

        MB maybe? - Nope they pay less

        Ok, so they will defect to the other lucrative manufacturing jobs. Maybe Harley Davidson - oops lay just laid off a bunch.

        Unemployment is over 8% and may get as high as 10%. The labor market is flooded with talent.

        You are as always...misinformed
      • 6 Years Ago
      It has to be done. The UAW itself is at stake. Ford has to be able to match it's competitors in labor cost per unit and that will require continually driving efficiency up and cost down. If Ford fails, there will be no union dues, and the unions are in the dues business.
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