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Ford-UAW contract bolsters job security.

Ford-UAW contract bolsters job security

Well before the start of negotiations between the United Auto Workers (UAW) and General Motors Corp. (GM) and Ford Motor Co., the parties indicated that their general goals would again be heavily influenced by conditions that have prevailed in the automobile industry since the beginning of the decade. On management's side, there has been the increasing competition in the domestic market from foreign companies which have more recently set up vehicle and parts production plants in the United States. To counter the generally lower costs of the foreign companies, Ford, GM, and Chrylser Corp. have closed marginal plans, modernized plants, moved from internal production of vehicle parts toward purchases from lower cost outside suppliers, pressed the UAW for moderate wage and benefit terms and cost-reducing changes in work rules and job assignments, and increased employee involvement in improving quality. On the union side, bargaining focused on countering the cut in jobs resulting from the companies' efforts to compete more effectively.

The 1987 negotiations, which began in July at both Ford and GM, were further complicated by a major competitive difference between the two companies, raising the possibility that they would break from the tradition of essentially identical agreements that has prevailed since the 1950's. The difference is the higher degree of vertical integration at GM, which produces 70 percent of the parts it uses, compared with about 50 percent at Ford. GM said this gave Ford a cost advantage because parts purchased from outside suppliers are generally less costly than those manufactured internally. Early in 1987, GM announced plans to alleviate the disparity by shifting about 10 percent of its parts production to outside suppliers. At the start of the contract negotiations, GM moved to further reduce the difference by proposing that employees receive performance bonuses linked to the quantity and quality of the output of their particular plant, with employees in parts plants being eligible for smaller maximum amounts than workers in assembly plants. This proposal was rejected by the union.

After bargaining simultaneously with both companies for about a month, the UAW, at the end of August, suspended negotiations with GM and focused on Ford, in accord with the union's usual "divide and conquer' strategy.

Prior to the mid-September contract expiration and scheduled strike date, Ford and the union had agreed, in principle, on a new job security program, easing the pressure on negotiators, who continued talking until they reached a peaceful settlement.

According to the UAW, the new Guaranteed Employment Numbers (GEN) job security program "moves well beyond' the Protected Employee Program adopted in 1984. Union officials said the new program will "maintain current job levels at all units in all locations and will prevent layoffs for virtually any reason except carefully-defined volume reductions linked to market conditions.' If employees are laid off because of volume reductions, Ford must recall them in proportion to any subsequent restoration of production before it can resort to overtime work. Ford is also permitted to lay off workers because of acts of God and other conditions beyond the company's control; the sale of operations as an ongoing business; and in cases where the workers have been assigned or recalled to temporary jobs.

The job security plan is scheduled to begin by January 1, 1988, backed by a $500 million Ford commitment. It provides for the number of "protected' employees at each plant to be increased when employees on the payroll at the effective date of the contract attain 1 year of seniority; when employees hired or rehired after the effective date of the contract attain 24 months of service; or when laid-off employees are recalled and receive pay for at least 26 weeks in any 52 consecutive weeks (this does not include employees recalled to meet the existing GEN requirements).

Protection will normally be reduced by one employee for every two who retire, quit, or die. If the parties agree on special payments or pension changes to induce employees to leave, the reduction will be on a one-for-one basis. A one-for-one ratio will also apply to plant closings.

At each facility, there will be a pool consisting of employees who would have been laid off if they had not been protected by the plan. All participants will continue to receive the same rate of pay and benefits they received prior to entering the pool. Pool employees may be placed in a training program, assume the work duties of another pool member undergoing training, or be given "nontraditional' assignments inside or outside the bargaining unit.

Workers who decline placement in a pool or who decline an assignment while in a pool will be replaced in the pool by a recalled employee or a new hire. The nonparticipating employees will be subject to layoffs based on their seniority, and will have recall rights only to a nonpool job.

Senior pool members will have first rights to an available job within their geographic zone. If they turn down the offer, the job will be offered successively to pool members in reverse seniority order until the job is filled. Those who decline the job offer will be laid off. If no pool member within a zone accepts the job, it can be offered to out-of-zone employees, who will not lose their pool protection if they decline. In each transfer case, one position will be transferred from the releasing location to the receiving location. Similarly, jobs will follow work shifts to a Ford plant from one that is cutting back operations or closing.

There were a number of changes in the existing "outsource' provisions which regulate Ford's right to purchase parts from other companies. The company agreed to: a broader definition of outsourcing; give greater weight to long-term job stability and the impact on related facilities before purchase decisions are made; establish joint local committees on outsourcing, with unresolvable issues subject to appeal to a joint national committee; and to give the UAW 90 days' notice of outsourcing decisions affecting one job or more, instead of the previous 60 days' notice of decisions affecting 25 jobs or more.

Jobs will also be saved or created as a result of a company pledge to make "appropriate investments in support of its market objectives for Ford U.S.-built cars and trucks.' During the negotiations, Ford identified 4,700 jobs in more than 10 facilities that will be created as a result of expansion plans already under consideration, as well as 4,200 jobs at five facilities which were at risk but are now planned to be saved.

From Ford's view, the crucial aspect of the contract is a new cooperative effort with the UAW to aid the company in improving product quality and operating efficiency, as well as increasing security for employees. To this end, the parties will establish a joint National Job Security and Operational Effectiveness Committee to direct and assist similar local committees. By mid-February 1988, each local committee will present plans for improving production quality and efficiency at its facility to the national committee. Provisions can include identification of needed plant investments; establishment of team production approaches for production workers, including changes to merit pay progression schedules if appropriate; identification of nonlabor cost savings; consideration of new forms of work planning in areas such as production and transportation and quality improvement; assuring supervisory support of programs; adoption of procedures to cut chronic absenteeism; giving the committees access to company product and employment plans and productivity records; and review of past outsourcing decisions, followed by consideration of ways to increase "insourcing.'

The accord, which runs to September 14, 1990, provides for an immediate 3-percent specified wage increase, ranging from 32.5 cents an hour for employees whose previous base wage rate was less than $10.92 an hour to 50.5 cents for those whose base rate was between $16.75 and $16.91. The 1984 agreement provided for an immediate increase of 9.5 cents to 47 cents.

The employees will be eligible for possible automatic quarterly cost-of-living pay adjustments calculated at 1 cent an hour for each 0.26-point movement in the BLS Consumer Price Index for Urban Wage Earners and Clerical Workers (1967 = 100). This is the same as in the 1984 agreement, except that there is no longer a provision for permanently removing 1 cent or 2 cents from each adjustment to help moderate the settlement cost. The union calculated that adjustments would total $1.73 an hour under the new contract, based on its projection of an average 4.7-percent annual rise in the CPI. Actual adjustments under the 1984 contract totaled 81 cents.

In October of 1988 and 1989, the employees will receive lump-sum performance bonus payments calculated at 3 percent of their earnings during the previous 12 months, including overtime, weekend earnings, holiday work premium pay, and incentive earnings. Under the previous contract, the workers received performance bonuses in October of 1985 and 1986, calculated at 2.25 percent of pay for compensated hours during 12-month periods, including overtime hours (but not overtime premium pay), vacation and holiday pay, shift premiums, and incentive earnings.

The profit-sharing plan, which had yielded payouts averaging $1,200 in 1985 and $2,100 in 1986, was liberalized by raising the employees' share to 7.5 percent of profits in excess of 1.8 percent but less than 2.3 percent of sales (a new bracket in the formula), plus 10 percent of profits between 2.3 percent and 4.6 percent of sales, plus 13.5 percent (formerly 12.5 percent) of profits between 4.6 percent and 6.9 percent, plus 16 percent (formerly 15 percent) of profits above 6.9 percent.

Limitations on overtime work during periods when workers are on layoff, which were addressed by the job security requirement that Ford must recall laid-off workers in proportion to any resumption in production, were also addressed by an increase in the overtime penalty. Now the company must pay $1.25 into the employee training and development fund for each hour of overtime work in excess of 5 percent of all straight-time hours worked. Previously, the penalty was 50 cents for each such hour.

Other terms included increases in health insurance benefits, such as dental care and expansion of hospice care, and increases in levels of life, sickness and accident, and extended disability insurance benefits resulting from increases in the base wage rates to which they are linked; an increase in Ford's funding of the legal services plan to 7.2 cents per hour worked, from 4 cents; an increase in tuition assistance under the development and training program, and adoption of a plan to aid employees in personal financial planning; addition of a paid holiday, the birthday of Dr. Martin Luther King, Jr.; and an increase (in three steps) in the pension rate totaling $4.20 a month for each year of credited service, bringing the range to $26.05 to $27 effective October 1, 1989, for employees retiring on October 1, 1987, or later.

At the end of September, the UAW reported that 72 percent of its voting members at Ford had approved the new contract.

After negotiations were completed at Ford, the bargaining focus shifted to GM. Despite the production cost disparity between Ford and GM resulting from their differing levels of outsourcing, a GM official said the Ford contract could be tailored to GM because it recognizes the auto industry's "cyclicality.' This raised the possibility that the pattern approach could more or less be maintained in the industry.

Chrysler, the third major domestic producer, had settled in concert with GM and Ford until 1979 when it encountered financial difficulties which led to major deviations. As Chrysler has improved its condition, there have been restorations of cuts in compensation, moving the employees toward a return to parity with GM and Ford workers. Chrylser's contract expires in September 1988.
COPYRIGHT 1987 U.S. Bureau of Labor Statistics
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Title Annotation:Developments in Industrial Relations; includes other labor contract information
Author:Ruben, George
Publication:Monthly Labor Review
Article Type:column
Date:Nov 1, 1987
Words:1985
Previous Article:Linking employee fitness programs to lower medical costs and absenteeism.
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