UPDATE 1-Foreign carmakers to keep price edge as Ford faces higher labor costs

30 Nov 2015 | Author: | No comments yet »

Ford Says UAW Contract Lifts U.S. Labor Costs Less Than 1.5%.

Foreign auto makers with plants in the United States will be able to offer lower vehicle prices as Ford Motor Co faces continued higher labour costs under a new four-year contract with its U.S. union workers. The labour cost gap of $8 to $10 per hour will allow auto makers such as Toyota Motor Corp, Honda Motor Co, Nissan Motors Co and Hyundai Motor Co to offer more attractive options while keeping vehicle prices competitive with the Detroit Three auto makers, or charge less for their vehicles. The contract will raise Ford’s hourly labor rate, including wages and benefits, to $60 from $57, Chief Financial Officer Bob Shanks told analysts and reporters on a call Monday. But the company said Monday that the deal with the United Auto Workers limits labor cost increases to 1.5 percent per year and is consistent with its full-year financial guidance. Ford said it will incur $600-million in expenses this year from the new contract, consistent with the company’s previously stated expectations for 2015.

The agreement gives “the flexibility to leverage Ford’s global manufacturing footprint to improve cost competitiveness,” according to a statement. “The agreement aligns our labor cost structure more closely with our competition and improves our manufacturing productivity and staffing flexibility,” Fields said in the statement. Cost increases will be kept in check by “significantly” greater use of temporary workers who make less than full-time employees, said Bill Dirksen, Ford’s labor chief.

But the agreement will save the company money by allowing more flexible work schedules and lifting a cap on the number of employees making entry-level wages. Ford also will be allowed to use “significantly more” temporary workers during summer vacations and busy times like new product introductions, according to Bill Dirksen, Ford’s vice president of labor relations. Ford’s labor costs will climb to $2,600 a vehicle in 2019, from $2,401 in 2014, exceeding Fiat Chrysler at $2,500 and GM at $2,350, according to the analysis by Dziczek and Schwartz. Fields said contract votes are almost always close, so he wasn’t worried about the narrow margin. “At the end of the day, we have a contract that works for our employees and allows our UAW workers to continue to share in the success of the company,” he said.

The Ford agreement, patterned on deals at Fiat Chrysler and GM, provides a path for newer workers to reach senior wages of about $29 an hour over an eight-year period. Veteran workers will get 3 percent pay increases in the first and third years of the accord, and 4 percent lump-sum payments in the second and fourth years.

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