Ford Motor Co. is five months ahead of schedule on a new master labor contract with the Canadian Auto Workers that would preserve Fords 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 Fords 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 UAWs 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 Fords cost for providing supplemental health insurance beyond the Canadian national health care system.
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 UAWs 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