Ford and UAW reach deal to trim labour costs

DETROIT Wed Feb 18, 2009 7:08am GMT

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DETROIT (Reuters) - Ford Motor has reached a deal with the United Auto Workers to reduce its labour costs in line with Japanese rivals and help it survive without government loans, the carmaker and union said on Tuesday.

Ford, which posted a record $14.6 billion (10.2 billion pound) loss in 2008, said the UAW deal includes changes to labour costs, benefits and operating practices. It is contingent on Ford resolving the funding of a union-aligned trust for retiree health care.

Ford has sought to distance itself from U.S. rivals General Motors and Chrysler, which have received $17.4 billion of government loans and on Tuesday requested nearly $22 billion more to support turnarounds.

However, it has been the needs of Ford's rivals that helped propel further cost cuts for the automaker. The UAW also reached "tentative understandings" with GM and Chrysler.

As part of their government bailouts, GM and Chrysler are required to make labour costs competitive with the U.S. operations of Japanese automakers Toyota, Honda and Nissan.

GM and Chrysler also are required to make half of planned contributions to Voluntary Employees Beneficiary Association trusts for retiree health care in company stock.

Ford executives had said they expected the union to provide labour cost parity with their U.S.-based rivals.

Ford and the UAW said they would not disclose terms of the agreement until VEBA discussions are completed. The agreement, reached on Sunday covers 42,000 Ford workers and must be ratified by members.

(Reporting by David Bailey; Editing by Phil Berlowitz)

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