Ford Motor Co (NYSE:F) said its new four-year contract with the United Auto Workers union will increase its costs less than 1 percent annually. Higher bonuses will be offset by newly won flexibility in work rules.
Ford (NYSE:F) saves money with the new contract due to no general wage increase, no cost-of-living allowance, and no “jobs bank” that pays laid-off workers nearly their full salary. Returning to an investment grade credit rating boosts Ford’s ability to reduce its borrowing costs. The UAW-Ford contract was ratified on Wednesday. Hourly workers voted by a nearly 2-to-1 margin to approve the pact, clearing the way for the creation of almost 6,000 jobs and investment of more than $6 billion in the U.S. plants. John Fleming, global manufacturing chief for Ford (NYSE:F), said more flexible work rules in the new contract would allow the company to “flex up or flex down” output at its factories more efficiently and at lower cost. The deal sets the competitive landscape with rivals General Motors (NYSE:GM) and Toyota Motor Company (NYSE:TM).
Shares of Ford (NYSE:F) — due to report its third-quarter earnings Wednesday — closed the week up 4.79%. That is up 23 percent since tentative agreement on the new contract was reached on October 4.