DETROIT (AP) — A new contract between Ford Motor Co. and the United Auto Workers union will raise the automaker's labor costs by less than 1 percent a year, reaching a company goal of holding the costs steady, executives said Thursday.
The four-year deal will raise costs by $280 million this year and around $80 million per year after that, but the increases will be offset by increased factory efficiency, other wage and benefit changes, and by hiring more workers at lower wages, the executives told reporters and industry analysts.
Ford's 41,000 union workers approved the contract Wednesday. They won't get annual pay raises but will get $6,000 signing bonuses and about $3,750 in profit sharing this year.
The deal also sets Ford up for a credit rating increase to investment grade status, and it opens the door to a possible dividend on the company's common shares, although Ford isn't ready to announce anything, Chief Financial Officer Lewis Booth said. Investment grade status would lower the company's borrowing costs.
"We think this will be favorably received because of the competitiveness of the settlement," Booth said on a conference call with reporters and industry analysts.
Ford also expects to add 5,750 jobs, mainly by adding shifts at factories that make cars and trucks which are selling well. New hires will get pay raises, but they'll still make about half the wages of longtime UAW workers.
Costs this year are expected to be higher because Ford must pay the signing bonuses and profit-sharing based on the company's first-half performance, but they'll drop in the final three years of the contract, the company said.
John Fleming, the company's vice president of global manufacturing and labor affairs, said the union agreed to shift changes that will let Ford use its factories for more hours per week. Those changes should cut the cost increases so they are minimal, he said.
Ford shares added a penny to $11.57 per share in morning trading.