Well, they had to do it—sign a deal with Ford, that is, and make the concessions needed to keep the company alive, even if many UAW workers hated the deal. They gave back hard-won gains the union had negotiated years ago.
One of these was the retiree trust fund for health care (VEBA). The company will now fund half its $3.2 billon contribution due next year with its high-flying $2.00 stock instead of cash. And yes, that will likely soon make VEBA kaput. Other concessions include:
- jobs bank ended
- no cost-of-living increases
- no performance bonuses
- cuts in break time; other work rule and schedule changes.
Most important for the company, hourly labor and benefit costs will resolve to $55 an hour, compared to $48-49/hour for transplant auto workers. Ford will reach parity with them, the company says, in two years.
Ford will also close some plants, move production to others, and, for the moment, avoid having to beg like its Big Three cohorts for government aid. The new pact clearly will set the pattern for negotiations with GM and Chrysler. But the VEBA deal Ford struck—half cash, half penny stock—won’t work for Chrysler, a privately held company owing almost $10 billion to VEBA by year’s end.
Last week Ford offered its bondholders a similar cash-and-stock deal. It’s doubtful that GM can match this. And so the dance continues.
The VEBA deal will net Ford about $500 million in annual savings. How quickly do you think they will burn through that?