Mike Stevens | Mar 11, 2009

In a breakthrough for the United States’ struggling carmakers, Ford has struck a deal with the United Auto Workers union that will save the company millions of dollars in payroll and health care obligations.

Following a record loss of USD$14.6 billion in 2008, and with car and truck sales down 48.5 percent in February, the deal will give Ford a little more breathing room as it struggles to return to profitability.

Ford employees have agreed to a wage freeze, elimination of cost-of-living increases, as well as forgoing some paid holidays and bonuses. The UAW Health Care Trust also came in for some changes as part of the deal.

General Motors and Chrysler now face pressure to strike similar deals with the UAW.

The two companies have together requested an additional USD $21.6 billion (AUD $33.3 billion) in government aid. One thing that will help their chances immensely is the implementation of cost-cutting measures like those made between Ford and the UAW.

ford-flex-production-line

Ford has not yet approached the US government for assistance and says it has enough funds to survive the downturn. Ford instigated the new deal with the UAW to help it manage the fall in income from recent poor car sales.

UAW reports that 58 percent of skilled-trades workers and 59 percent of production line staff voted in favour of the agreement.

Commenting on the new deal, UAW vice-president Bob King said, "The voting results show that our members are prepared to make painful sacrifices in order to be part of the solution to the problems facing Ford and the US auto industry."

The deal also saves Ford billions of dollars on its on-going health care obligations. A trust fund for retired workers can now be paid up to half in stock rather than cash.

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