Ford Out Front

Auto workers take a wage cut

American auto companies and their employees have been caught for months in a quandary. As car sales dragged along at their lowest level in 21 years, more and more workers lost their jobs. Some 240,000 United Auto Workers members are on indefinite layoff. Auto companies claimed that high salaries and benefits helped push up the price of American cars and made it hard to compete against Japanese imports. Although worried about further layoffs, workers were reluctant to accept substantial wage reductions. But last week Ford and the U.A.W. agreed to a new 2 1/2-year contract that cuts workers' benefits in return for guarantees of job security.

Ford, which this week is expected to announce that it lost more than $1 billion in 1981, presented the union on Jan. 15 with a broad plan to reduce wage rates, which U.A.W. Vice President Donald Ephlin immediately described as "intriguing." The company proposed a 31-month freeze on wages and a 15-month halt to cost of living increases. It also asked workers to give up all nine of their personal paid holidays and one of their weeks of vacation time. Employees with more than 20 years of seniority currently are entitled to five weeks of vacation, and those with 15 years get four weeks.

In exchange, Ford had suggestions for ways to meet the union's concerns about job security. It proposed to suspend any new plant closings for one year, although it retained the right to shutdowns because of model changeovers or slumping sales. In addition, the company said it would extend supplemental unemployment benefits from twelve months to up to two years for workers with ten years' seniority and promised to begin a profit-sharing plan in two years.

As a final sweetener, Ford offered workers a "guaranteed income stream." In essence, the plan is something like the Japanese system of lifetime employment. The company said it would give employees with 15 years on the job at least 50% of their current wages until retirement, regardless of whether they were working or not. An employee laid off after 25 years, for example, would collect about $240 a week.

In addition to providing workers with regular paychecks, the plan would ease union fears of "out-sourcing," the growing auto company practice of buying parts from cheaper, nonunion plants in the U.S. and abroad. The U.A.W. estimated that 100,000 jobs may have been lost because of auto-industry decisions to buy car parts abroad.

Ford Vice President Peter J. Pestillo and U.A.W. President Douglas Fraser bargained for nearly two weeks at Ford's Dearborn headquarters. Said Fraser just before the final round of talks last Saturday: "As I look back, I'm glad we failed when we tried to reach a similar deal with GM. We're going to do better here."

Indeed, the union won a surprising two-year moratorium on closing plants because of outside suppliers and an agreement in principle that future labor reductions would come only as a result of attrition. In addition, Ford promised to replace all union jobs lost because of outsourcing. In exchange, the union will give up its 3% pay increase this year and in 1983, ten paid personal holidays and cost of living increases for the next nine months. Said Pestillo after the agreement was announced: "It's a very happy evening for all of us. This represents a major transition in labor relations."

U.A.W leaders this week will begin presenting the new contract for approval to some 160,000 hourly workers at Ford. If the agreement is accepted, Ford's better idea could serve, in part, as the model for upcoming union talks with General Motors and Chrysler, when their contracts run out in September. qed

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