Staying Out of Bankruptcy Costs Ford in Some Ways

Ford is close to winning a new round of concessions from its UAW employees, a move that's necessary, ironically, because Ford avoided bankruptcy earlier this year.

Rivals Chrysler and GM racked up some financial advantages by going bankrupt and repudiating existing debt. For instance, bankruptcy allowed GM to cut its obligations by more than $40 billion, to about $17.3 billion.

Staying out of bankruptcy seems to have helped Ford in the public eye, but it also means Ford has some catching up to do, on its balance sheet.

Yesterday, Oct. 13, Ford and the union announced they had reached a tentative agreement covering about 41,000 UAW-represented employees in the United States. Rank-and-file members still have to ratify the agreement for it to take effect.

Neither side would disclose the particulars, but the agreement is widely reported to mirror give-backs at other automakers, including concessions for entry-level workers and relaxed work rules that make it easier for Ford to reassign employees.

The newest agreement modifies an all-new contract that took effect in 2007, which shifted responsibility for health-care obligations from the automakers to an independent UAW trust. Since then, the UAW also agreed to accept shares in the companies, in lieu of cash contributions to the trust.

"This agreement is another step in meeting the challenges of a very difficult time in the U.S. auto industry, and we look forward to presenting it to UAW Ford workers," said UAW President Ron Gettelfinger, in a written statement.

Photo: UAW