CAW reaches early deal with Ford

Preliminary deal preserves wages; protects St. Thomas plant

Buzz Hargrove
Ford Motor Co. is five months ahead of schedule on a new master labor contract with the Canadian Auto Workers that would preserve Ford’s St. Thomas, Ontario, assembly plant until at least 2011.

Ford and the union agreed to the basic economic terms of a contract Monday, the CAW said in a release. The union expects to have the deal wrapped up this week.

The contract also must be ratified by the rank and file at Ford’s two Canadian assembly plants and other component plants with CAW representation.

Contract talks with the union were expected to be dicey because CAW President Buzz Hargrove opposed provisions such as the two-tier wage that were instrumental to the UAW’s contract with the Detroit 3 last autumn.

"We were not going to do a tier-two and if Ford had insisted it would have resulted in a fight," Hargrove told Automotive News Monday.

Instead, Ford and the CAW got ahead of the game with an agreement months before the current contract expires in September.

"These discussions have progressed more quickly than usual," said Ford Canada spokeswoman Lauren More. "I think both the company and the CAW recognize the importance of reaching an agreement that provides a competitive future for our business and our employees."

Ford and the CAW continue to discuss items specific to local operations.

"Because our discussions are continuing, it would be premature to comment on the details," More said.

Local discussions are occurring this week, but Ford declined to speculate on how soon a tentative agreement might be ready for ratification. No timeline has been set, More said.

Relief for Ford

The agreement would give Ford some relief, especially on the cost of vacation time and health care, while keeping union wages from being cut. CAW members earn about $85 (U.S.) an hour in wages and benefits, a cost higher than the UAW hid for years by the value of Canadian currency.

As the Canadian dollar has reached par with the U.S. dollar, those cost disadvantages have been exposed. UAW workers at the Detroit 3 earn about $73 an hour in wages and benefits. But that average will decline substantially as the carmakers replace retirees with new hires earning half the amount paid to veteran workers.

Getting the contract done early also is important to Ford for the launch this fall of the Ford Flex crossover at its assembly plant in Oakville, Ontario. That plant now builds the hot-selling Ford Edge and Lincoln MKX crossovers.

The CAW said it would help Ford by freezing cost-of-living payments in the first year of the three-year contract; forgo 40 hours of vacation annually; and allow for the establishment of a pre-funded off-balance-sheet retiree health fund that would reduce Ford’s cost for providing supplemental health insurance beyond the Canadian national health care system.

New-hire package

The union also agreed to a new-hire wage and benefit package that would start workers at 70 percent of veteran wages but allow for a quick “grow-in” to full equal wages within three years.

That is different from the UAW’s two-tier agreement that would pay new hires 50 percent of the $28 an hour earned by veterans with no chance of catching up.

In exchange for the cost savings, Ford assured the CAW that it would keep St. Thomas open until at least 2011, a year longer than planned. The plant makes the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car sedans.

To help make the givebacks more palatable, Ford agreed to compensate workers with a one-time $3,500 payment for the lost vacation and a $2,200 quality and productivity bonus at ratification of the overall contract.

Hargrove said the contract provides savings to Ford commensurate with those won from the UAW. Consequently, when the contract is fully applied, the CAW will continue with about a $7 an hour advantage in pay and benefits over their UAW counterparts.

But the CAW has higher productivity to justify the difference, he said.

Hargrove put CAW worker costs at $67 an hour in wages and benefits compared with about $60 for the UAW. That is far less than most estimates of $85 an hour for CAW auto workers and $73 for the UAW.

Hargrove said as soon as is convenient, he would like to meet with Ford CEO Alan Mulally to fight to bring future product to St. Thomas, Ontario, that will keep the plant open past 2011.

Hargrove said getting a fair contract early was critical to the union and Ford.

The union is worried about marketshare losses of the Detroit 3 to especially the Japanese and South Korean carmakers that keep their markets virtually closed to the North American car companies. The struggling economy and new fuel-efficiency standards meant that the union and Ford needed to be working from the same page to address those influences, he said.

What's more, the launch of the Flex crossover is critical to Ford and a union that wants it to go off without a hitch as Ford adds a third shift at Oakville to accommodate the growth.

Amy Wilson contributed to this report

PRESS RELEASE: CAW Beats Back Two-Tier Wages, Wins Reprieve for St. Thomas Plant

April 28, 2008 - Following early background negotiations, Ford Canada and the CAW have reached an agreement on a Master Economics Offer that will now become the centerpiece of all-out collective bargaining aimed at reaching a tentative agreement between the two sides later this week. For a full tentative agreement to be reached, agreement also must now be attained on all local agreements (skilled trades, health and safety, etc.). That tentative agreement must then be ratified by CAW members at all Canadian locations. The current collective agreement expires at midnight September 16. The Master Economics Offer was endorsed unanimously by members of the CAW-Ford Master and local bargaining committees at a special meeting in Toronto on Monday.

Highlights of the Master Economics Offer:

- Three year contract, expiring midnight September 14, 2011;

- No changes in base wages;

- No two-tier system for wages, pensions or benefits;

- Extended the life of the St. Thomas assembly plant through life of agreement (to 2011) The product commitment was scheduled to end in 2010;

- COLA payments frozen for remainder of current contract, and first year of the new contract. Quarterly COLA wage adjustments resume under existing formula Dec. 2009;

- $2200 “productivity & quality” bonus to be paid upon ratification;

- Inflation-indexed pension increases for both existing and new retirees in second and third year;

- Significant savings in health costs (stricter cap on long-term care, 10% co-pay on drugs to $250 annual maximum per family);

- Modest improvements in health benefits and spousal insurance benefit;

- New-hire grow-in system, where wages, COLA, SUB benefits, and time-off provisions are phased in (starting at 70% of base wages) over the first three years of work; after three years, wages reach 100% of base wages;

- Reduction in vacation pay by 40 hours per year, compensated with special $3500 cash payment in January 2009;

- Improved restructuring benefits (“buy-outs”) and renewed income security funds.

- Commitment to explore Canadian opportunities to establish a pre-funded, off-balance-sheet Retiree Health Benefit Fund;

The offer includes a mixture of modest gains and cost savings that in the CAW’s judgment will ensure that Canadian facilities over the life of the agreement will remain in the ballpark for new investment opportunities.

You can reach David Barkholz at dbarkholz@crain.com

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