Ford Says UAW Deal Will Increase its Costs by Under 1% Annually

Ford Motor Co said on Thursday its new four-year contract with the United Auto Workers union will increase its costs less than 1 percent annually with higher bonuses offset by newly won flexibility in work rules.

Ford said the labor pact would cost $280 million in lump-sum payments in 2011, and about $80 million on average over the remainder of the deal to 2015.

The No. 2 U.S. automaker said it expected to reduce the number of higher-paid skilled trades workers in its U.S. factories by about 1,000 through buyouts. At the same time, Ford expects lower-paid, entry-level employees to make up about 8 percent of its factory work force by 2015, up from fewer than 100 workers when negotiations with the UAW began this summer.

John Fleming, Ford's global manufacturing chief, said more flexible work rules in the new UAW contract would allow the automaker to flex up or flex down output at its factories more efficiently and at lower costs.

This is all about us driving utilization at our facilities, Fleming told analysts and reporters on a conference call on Thursday as he detailed how the contract would affect Ford's profitability and finances.

The UAW contract covering 41,000 Ford workers was ratified on Wednesday.

Ford's hourly workers voted by a nearly 2-to-1 margin to approve the four-year deal, clearing the way for the creation of almost 6,000 jobs and investment of more than $6 billion in the automaker's U.S. plants.

Analysts have said the contract would boost its chances for a credit rating upgrade to investment grade that would reduce borrowing costs for Ford.

Ford Chief Financial Officer Lewis Booth said on Thursday that a credit rating upgrade was not a precondition for Ford to decide to resume dividend payments it had suspended.

There is an opportunity to think going forward about a dividend not directly related to the achievement of 'investment grade,' Booth said.