Home News Cars Ford to book $600M 4Q expense for new labor contract

Ford to book $600M 4Q expense for new labor contract

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In this Thursday, Nov. 19, 2015, photo, the Ford blue oval badge is in the grill of a 2015 Ford F-150 XLT on display in the showroom at Butler County Ford in Butler, Pa. Ford said Monday, Nov. 30, 2015, it will book a $600 million fourth-quarter expense mainly for signing bonuses paid to union workers under a new four-year contract. (AP Photo/Keith Srakocic)

DETROIT (AP) — Ford Motor Co. will book a $600 million charge in the fourth quarter for signing bonuses paid to union workers under a new four-year contract.

But the company said Monday that the deal with the United Auto Workers limits labor cost increases to 1.5 percent per year and is consistent with its full-year financial guidance. Ford is forecasting a pretax profit of between $8.5 billion and $9.5 billion this year.

The new contract gives raises to all of Ford’s 53,000 U.S. hourly workers and eliminates a two-tier wage system at its plants over eight years.

Ford also agreed to $9 billion in U.S. factory investments and said the deal would add or secure 8,500 U.S. factory jobs. Most workers will get an $8,500 signing bonus and $1,500 in early profit sharing.

But the agreement will save the company money by allowing more flexible work schedules and lifting a cap on the number of employees making entry-level wages.

Ford also will be allowed to use “significantly more” temporary workers during summer vacations and busy times like new product introductions, according to Bill Dirksen, Ford’s vice president of labor relations. Dirksen wouldn’t say how many temporary workers Ford currently has.

Ford CEO Mark Fields said the contract also gives the company flexibility to move production to lower-wage countries like Mexico.

“We’re not restricted from sourcing products anywhere in the Ford world for sale in North America,” Fields told analysts and media during a conference call.

Ford’s hourly workers approved the agreement by a 51-percent margin on Nov. 20 after months of bargaining. Fields said contract votes are almost always close, so he wasn’t worried about the narrow margin.

“At the end of the day, we have a contract that works for our employees and allows our UAW workers to continue to share in the success of the company,” he said.

Ford will be paying an average of $60 per hour in wages and benefits by the end of the agreement. Ford Chief Financial Officer Bob Shanks said that will close Ford’s wage gap with General Motors Co. and narrow the gap with Fiat Chrysler, which has a higher percentage of entry-level workers.

But Shanks said Ford will still be paying $8 to $10 more per hour than foreign competitors like Toyota Motor Corp. and Honda Motor Co. pay their U.S. workers.