updated 10/25/2007 7:34:32 PM ET 2007-10-25T23:34:32

Ford Motor Co. and the United Auto Workers have agreed in principle on the company’s wish to further shrink its U.S. hourly work force as negotiations on a new contract start to ramp up, according to a person briefed on the talks.

Industry analysts say agreement on the issue means Ford could close more factories beyond the 16 that it said would be shuttered under a restructuring plan announced last year. The company has identified 10 of the closures, but has yet to announce the remaining six. The closures are to be fully completed by 2012.

The job reductions would take place with early retirement and buyout offers similar to those made as part of the company restructuring plan announced last fall, said the person, who requested anonymity because the talks are private.

Just how many workers would leave is still under negotiation, the person said.

Ford spokeswoman Marcey Evans would not comment on the talks. Messages were left for UAW spokesman Roger Kerson.

Aaron Bragman, an auto industry analyst with Global Insight, said the buyout offers may sweeten the deal for what could be a painful contract for workers. Ford is struggling to reduce factory capacity to match its U.S. market share, which has dropped from around 26 percent in the early 1990s to about 15 percent for the Ford, Lincoln and Mercury brands. Bragman said Ford may need to close plants beyond the 16 planned if its market share doesn’t stabilize at 15 percent.

“The big question is, really, is Ford done with their market share shrinkage?” Bragman said. “We’re not necessarily confident that they are.”

Greg Gardner, an analyst for Harbour Consulting, a Troy company that tracks manufacturing productivity, said several Ford assembly plants are at risk for closure because the automaker has significantly more North American plant capacity than it needs.

Ford used about 79 percent of its plant capacity in 2006; a company needs to be in the low- to mid-90-percent range to maximize profitability, he said.

Ford’s Chicago Assembly Plant, which makes the Ford Taurus sedan and the Taurus X crossover, used just 65 percent of its capacity in 2006, Gardner said. Through September of this year, the Chicago plant made 87,500 vehicles, or nearly 22,000 fewer than the same period a year ago.

Production also is down 20 percent so far this year at the Louisville Assembly Plant, which makes the Ford Explorer. Production was already running at a low 82 percent capacity before this year’s drop, Gardner said. But Louisville has a powerful ally in UAW President Ron Gettelfinger, who began his career as a chassis line repairman at the plant.

The Michigan Truck Plant in Wayne, which makes the Ford Expedition and Lincoln Navigator, was operating at just 54 percent capacity last year, Gardner said. He said the plant is doing better this year but could still be a candidate for closure.

Gardner said a plant in St. Thomas, Ontario, which has been running at 55 percent capacity, also is vulnerable, but the plant isn’t covered by the United Auto Workers union so it wouldn’t be part of this year’s negotiations. The St. Thomas plant makes the Lincoln Town Car and Ford Crown Victoria.

Bragman said the Wayne Assembly Plant in suburban Detroit, which makes the Ford Focus, also could be in jeopardy because the next generation of the Focus will be built on a global platform and see much of its sales volume outside the United States. But Bragman said the weak dollar may actually help keep production at U.S. plants.

In the negotiations, Ford is likely to follow a pattern established in the UAW’s deal with General Motors Corp., although Ford could seek deeper concessions because its financial state is worse.

The new contract with GM allows the company to make buyout and early retirement offers to 16,000 workers deemed “noncore,” which generally means those who don’t build cars or make parts. Chrysler’s tentative deal has the same provision for 11,000 hourly workers.

At GM and Chrysler, noncore workers who leave could be replaced by new hires on a lower pay scale starting around $14 per hour.

Ford now has about 60,000 hourly workers represented by the UAW.

In June, the company announced that 27,000 hourly workers had left under the early retirement and buyout offers. When it announces its third-quarter earnings in the next few weeks, the company will reveal that more than 30,000 hourly workers have taken offers to leave, according to a company official who also requested anonymity because the announcement had not yet been made.

Ford set a goal of shedding up to 30,000 hourly workers by the end of 2008.

The company turned a surprise $750 million profit in the second quarter of this year, but still lost $279 million in North America. Ford has mortgaged its factories to set up a $23.4 billion credit line to fund the restructuring and cover expected losses. It doesn’t expect consistent profits until 2009.

A demand for further downsizing at Ford would be different from the UAW’s tentative contract agreement with GM, which committed to build new products at 16 assembly plants, protecting thousands of jobs. Chrysler’s pact, however, has commitments that mainly run for the life of the four-year contract.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.40%
$30K home equity loan FICO 5.80%
$75K home equity loan FICO 4.54%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.70%
13.70%
Cash Back Cards 17.66%
17.91%
Rewards Cards 17.05%
17.17%
Source: Bankrate.com