Ford Softens Labor Impact Under New Agreement
Ford will pay only 1.5-percent more in labor costs each year under a new contract with the United Auto Workers, the automaker reported Monday.
Ford announced it would take a $600 million charge this year to pay out the $10,000 ratification bonuses to their workers as part of the new deal.
The new deal allows the automaker to hire more low-cost workers who will either be temporary or entry-level employees, shift production of some of its cars overseas and continue using controversial “alternative work schedules” that favor fewer, longer shifts instead of traditional work days.
The contract closes the gap to other U.S. automakers because “the agreement aligns our labor cost structure more closely with our competition and improves our manufacturing productivity and staffing flexibility,” Ford president and CEO Mark Fields said in a statement.
According to Bloomberg (via Automotive News), Ford’s anticipated labor cost per car will rise to $2,600 in 2019 from $2,401 in 2014, which would still be the most for any Big Three automaker: Fiat Chrysler Automobiles’ cost would be $2,500 and General Motors $2,350, according to the report.
Ford’s hourly labor cost will also rise to $60 per hour in 2019, up from $57 this year.
The union contract was narrowly approved in an 11th hour vote at one of Ford’s biggest facilities. According to the UAW, its contract with Ford was approved by 51.3 percent of production workers and 52.4 percent of skilled trades workers.
All three of the Detroit automakers are shifting higher-margin vehicles to North American plants, in part to offset the labor costs. In some cases — such as the Ford C-Max and Focus and Chrysler 200 — automakers are moving car production to Mexico where labor costs are lower.
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This comment from the author; "All three of the Detroit automakers are shifting higher-margin vehicles to North American plants, in part to offset the labor costs." The comment is not good for the US auto manufacturers. What it states is they can't compete. Most of these vehicles are not viable outside of the US market. Their viability is based on the price of energy. Diversification is required. Spread the pain. GM and Ford Australia made a similar mistake with the Falcon and Commodore. Big vehicles only have so long left. What will the unions do when the large, high profit, US exclusive vehicle demand gradually dries up?
Is the $120k/hr referenced above a figure for salary and benefits alone, or is it a per-hour imputed manufacturing cost including manufacturing overhead? Given a 2000 hour year, $60/hr is a quite reasonable total manufacturing cost, when the following calculations are used: Many companies throw all their manufacturing overhead into a bucket, add actual salary and benefit costs, divide by hours worked, and state a per hour manufacturing cost. This kind of accounting, of course, overstates the cost of labor and understates the cost of purchased parts, resulting in a strong incentive to outsource and purchase all the parts. Moving manufacturing to successively impoverished hellholes has minimal effect on imputed labor costs when they are calculated that way, but it provides a good excuse for management to get ready of troublesome first world workers and replace them with less troublesome third world workers. You should not assume that labor costs reported by manufacturers are necessarily what they say, especially when those labor costs are being used as justification for decisions that they want to make anyway. The general public do not understand the extent to which accounting is used and manipulated to justify theories of management.