Ford and UAW deal could save $500 million annually

Taking care of its retirees is one of the things the American auto industry prides itself on, and for good reason. But it's also one of the things that are making it hard to compete with foreign carmakers - the expenses are getting out of control. To help keep both Ford and the UAW operating in the current market, a new deal has been struck that changes the way retiree health care is funded, and most critically, Ford says it could help save up to $500 million annually.

The new terms also significantly improves Ford’s competitiveness and will allow it to restructure its U.S. outfit into a much leaner operation. About half of the cost savings will come from the suspension of cost-of-living payments and planned performance and Christmas bonuses. Break time reductions also will save about $50 million, reports Automotive News.

Other changes in the contract include a reduction of supplemental unemployment pay and the elimination of the Jobs Bank, in which workers on long-term layoffs continued to draw their pay.

Ford also plans to close one of two assembly plants at its Wayne, Michigan, facility. Assembly work there will be consolidated in 2010 to the former Michigan Truck plant, which stopped producing Ford Expeditions and Lincoln Navigators last year. This will free up capacity for production of the all-new global Focus.

For its part, Ford seems satisfied with the changes too. Joe Hinrichs, group VP of global manufacturing and labor affairs (pictured above), said, "By working together with our UAW partners, we identified solutions that will help Ford reach competitive parity with foreign-owned auto manufacturers and that are important to our efforts to operate through the current economic environment without accessing a bridge loan from the U.S. government."

That last point may be of most interest to both the average UAW worker and the average American taxpayer. Throughout the current market downturn, however, Ford has maintained the most solid position of the Detroit carmakers, so perhaps it comes as no surprise.