New UAW pact trades raises for profit share

10/5/2011

DETROIT -- The union that once set the gold standard for American wages is giving up pay raises in exchange for a piece of the auto industry's profits and the promise of thousands of new jobs.

Under agreements struck with Ford Motor Co. and General Motors Co., most of the companies' factory workers will get profit-sharing checks instead of annual raises. They will also get a signing bonus. In turn, the automakers will increase their work forces and invest billions of dollars in their factories.

It is an unusual turnabout for the United Auto Workers. For decades, its members' pay and benefits were the envy of workers around the world, and it would not hesitate to strike to protect them. But the agreement signals a new reality. After the industry nearly collapsed two years ago, a sobered UAW is no longer fighting the Detroit Three but fighting to compete against rivals who pay their workers far less.

"We are aware of the competition that Ford and General Motors and Chrysler face," UAW President Bob King said yesterday after announcing terms of a new four-year contract with Ford. "If we are going to succeed in the long run and really be able to have long-run security and decent income for our membership, we can't put Ford and GM and Chrysler at a competitive disadvantage."

Ford and the UAW agreed on a four-year contract yesterday, three weeks after the union reached a similar agreement at GM. The companies are promising at least 17,000 new U.S. jobs over the life of the contracts, and are offering workers signing bonuses and profit-sharing payments. But the companies will be able to contain their costs by not paying annual raises to their U.S. factory workers and by hiring thousands of workers at lower wage rates.

Mr. King said some workers will be unhappy, but he thinks they can live with the terms. GM workers have ratified their agreement; Ford workers are expected to wrap up voting by Oct. 14.

Ford workers will get at least $16,700 each over the four-year contract, in the form of a $6,000 signing bonus, $7,000 in lump-sum and inflation protection payments, and at least $3,700 in profit-sharing this year. That is more generous than GM's agreement, which guarantees workers at least $11,500.

Ford plans to add 5,750 U.S. factory jobs under the deal, on top of 6,250 it had announced this year, for a total of 12,000 jobs by 2015. It pledged to invest $4.8 billion in its U.S. factories. With $1.4 billion in investments already announced, Ford plans to invest $6.2 billion by 2015.

Ford's 41,000 hourly workers will get $1,000 more as a signing bonus than the $5,000 bonus GM workers got under their agreement. The GM agreement gives most workers profit-sharing payments instead of annual raises and promises 6,400 new or retained jobs.