Ford Motor Co.'s active and retired autoworkers, who have long enjoyed some of the most generous benefits in the country, will have to pay more for their health care under a tentative agreement between the automaker and the United Auto Workers, the union said Wednesday.
The agreement could save Ford $850 million annually if it's ratified by Ford's active workers, the union said. Ratification votes must be completed by Dec. 22. Local unions can schedule votes anytime before then, the UAW said.
If the agreement is ratified, it will be the second time in two months that UAW-represented workers have agreed to pay more for their health care. General Motors Corp. workers voted for a similar deal last month by a 61 percent margin. The UAW said it also is considering a similar deal for DaimlerChrysler AG.
It's the first time since 1982 that the UAW has agreed to contract changes outside its usual negotiation period with the Big Three, said Harley Shaiken, a professor and labor expert at the University of California, Berkeley. The UAW's next contract negotiations with U.S. automakers are set for 2007.
UAW President Ron Gettelfinger said the union has agonized over the changes but believes they're necessary to help U.S. automakers who are rapidly losing North American market share to foreign competitors.
"We think it's the responsible thing to do in the current climate in which we find ourselves competing," Gettelfinger said. "This has been a long year for us. It's been an anguishing year on this type of issue."
Ford said it won't comment on the agreement until it's ratified by workers.
"We're pleased to have reached a tentative agreement with the UAW on health care," Ford spokesman Tom Hoyt said. "It would be inappropriate to comment further until it is final."
Under the tentative agreement with Ford, retired autoworkers would start paying monthly contributions and yearly deductibles, up to a maximum of $370 a year for individuals and $752 for a family. They don't pay such fees now.
Hourly workers won't be required to pay deductibles or monthly contributions, but they will have to contribute to a trust for future health care expenses. Under the agreement, hourly workers would contribute a 3 percent wage increase scheduled for 2006 as well as portions of future cost-of-living adjustments. Ford would contribute $108 million to the trust by 2011.
The agreement raises the cost of prescription drugs and institutes a $50 emergency room fee for retirees. It exempts around 28,000 retired autoworkers whose Ford pension income is $8,000 a year or less.
The agreement also requires Ford to invest $900 million over five years into plant improvements and advanced technology initiatives, such as building hybrid and fuel cell vehicles.
"We're hoping that the company now will focus more on product and recapturing market share," Gettelfinger said.
The UAW calculated Ford would save $850 million annually on a pretax basis with the deal but said it didn't know how much Ford would save in long-term retiree liabilities.
Dearborn-based Ford, the nation's second-largest automaker, lost more than $1.4 billion in its North American operations in the first nine months of the year. Hoyt said Ford doesn't break out health care spending for retirees, but it spent about $3.1 billion to cover 550,000 hourly and salaried workers, retirees and dependents in 2004. The company expects that to rise to $3.5 billion this year.
The health care agreement is only part of a major restructuring plan Ford expects to announce in January. The company has said job cuts and plant closures will be part of that plan.
Gettelfinger said the union doesn't yet know any details about the restructuring.
"I think they're being slow and meticulous for a reason. I think they're working really hard for a plan they think will move them forward," Gettelfinger said.