Ford and Visteon Close To Handshake

Chicago September 28, 2003; Jeremy Grant writing for FT.com reported that Ford Motor Company and its former parts making unit Visteon were on Sunday night awaiting ratification by the companies' unionised workers of a new, four-year labour contract.

Approval would mark the second approval by employees of the "big three" Detroit carmakers since Friday, when the United Autoworkers union said its members had approved a new contract with DaimlerChrysler.

General Motors and its former parts subsidiary Delphi will be the last group to achieve ratification, although it was not clear when this might be possible.

The developments are the culmination of months of talks between the UAW and the three carmakers and Visteon and Delphi, both of which were spun off from their parents three years ago.

Broadly, the outcome of the negotiations has been that the carmakers have persuaded the UAW to accept plant closures and job losses that the carmakers say are needed as part of efforts to cut costs and improve profitability.

But the unions have largely managed to defend the size and scope of their generous healthcare and pension packages, as well as those for legions of retirees.

Analysts say that this will continue to hamper Detroit's efforts to compete with Japanese and European rivals, which have virtually no so-called legacy costs. Michael Bruynesteyn, auto analyst at Prudential Securities in New York, said that healthcare costs "remains a huge problem that swamps any gains from this contract".

The unions have also agreed to less generous wage packages than in the previous contract, negotiated in 1999.

The roughly 65,000 DaimlerChrysler employees covered in the contract ratified last week will receive a $3,000 up-front signing bonus; a performance bonus in the second year of the contract; a 2 per cent raise in the third year of the contract, and a 3 per cent raise in the fourth year.

Employees will now contribute $10 towards the cost of branded prescription drugs, double the previous amount. But carmakers say that increasing such "co-pays" will have only a modest effect on the overall healthcare burden while employer insurance premiums remain high and workers increase their use of more expensive branded drugs, rather than cheaper generic drugs.

Once union members have ratified the Visteon and Delphi contracts, the companies will then have to negotiate a "supplementary" contract setting out the benefits that any new employees will receive.