updated 11/2/2006 4:38:25 PM ET 2006-11-02T21:38:25

Ford Motor Co. is cutting benefits for U.S. salaried employees as it struggles to conserve cash after a $7.2 billion loss so far this year.

Ford is scaling back health care benefits, raising premiums, eliminating merit pay for 2007 and delaying December paychecks by one week, Ford spokeswoman Marcey Evans said Thursday.

"We are working hard to ensure we continue to provide competitive total compensation to our work force, while attacking our uncompetitive cost structure, including employee health care costs," Mark Fields, head of the automaker's Americas unit, said in an e-mail to employees Wednesday.

The cuts come after Ford last week posted a third-quarter $5.8 billion loss, its largest in 14 years, as it absorbed restructuring charges, operating losses and asset write-downs. Ford lost $1.4 billion in the first half of the year.

Ford has warned that operating results would weaken in the current quarter and cash flow would remain negative in the coming few years as it closes 16 plants and slashes nearly 45,000 jobs to turn around its North American unit.

Evans said Ford will eliminate health insurance for Medicare eligible retirees in 2008 and raise health care premiums in June 2007 for employees by about 30 percent, the second straight year of increase.

The No. 2 U.S. automaker also will replace its traditional health coverage for salaried retirees over 65 with a $1,800 annual stipend that they can use to buy supplemental health coverage in addition to government-run Medicare.

Ford will stop paying for any health care coverage for dependent children of retirees who are over 65, Evans said.

In addition, this year, all hourly and salaried employees will also see their year-end paycheck delayed by one week.

Instead of paying employees before the holidays Dec. 22, as is the tradition, employees will receive their salary Dec. 29, Evans said.

"This change alone will save the company $70 million of cash flow this year without reducing compensation to employees," Fields told employees in the e-mail, which was released to Reuters.

Ford typically announces employee benefit changes for the following year in the fourth quarter.

The company made the announcement early in the fourth quarter this year to give employees time to plan for the delayed December paycheck, Evans said.

On a brighter note, Ford will reinstate matching contributions for salaried employee 401(k) retirement plans.

Ford will begin contributing 60 cents per dollar up to 5 percent of an employee's base pay beginning next year, Evans said.

"Earlier in the year we had conducted a survey where we asked employees to rate benefits against other benefits to find out what things in the total of the benefits were most important to them," Evans said.

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