2019 UAW-Ford Negotiations Media Fact Guide

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Background

This document provides background material on Ford Motor Company through year-end 2018, its Collective Bargaining Agreement with the UAW and facts related to some subjects that may be discussed during negotiations. It includes a number of charts and graphs that can be reproduced to illustrate company and industry trends.

For more information about Ford’s business and financials, please refer to our company’s Annual Report for the year that ended Dec. 31, 2018, and to subsequent filings with the SEC.

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Ford has more U.S. hourly UAW-represented workers than any other automaker and builds more vehicles in the U.S. than any other automaker. Ford is committed to a safe, harassment-free workplace for all employees. As of the end of 2018, Ford had 55,461 U.S. hourly UAW-represented workers. It is important that the company reaches a contract that keeps Ford competitive with all automakers that build in the United States. Approximately 82 percent of the vehicles Ford sells in the U.S. are built in the U.S., significantly higher than any other automaker.

 

National Negotiations
The current UAW-Ford national contract expires at 11:59 p.m. on Sept. 14, 2019. If a new contract is not ratified by then, the UAW and Ford can agree to extend the contract, continue working without a contract or the UAW could call for a strike.

The national contract is a series of agreements that cover the company’s UAW-represented hourly employees. These agreements generally fall into three broad categories:

  • Wages and working conditions: Including base wages, paid time off, grievance procedures, management rights and general seniority matters
  • Benefits: Including healthcare, retirement, supplemental unemployment benefits, profit sharing and a tax-efficient savings plan for hourly employees
  • Appendices and letters of understanding : These clarify parts of agreements or deal with matters not referred to in the agreements – covering subjects such as job security, sourcing and operational effectiveness

 

Local Negotiations
In addition to national negotiations, Ford and the UAW will conduct local negotiations for separate hourly UAW-represented bargaining units. Most are individual plants or parts distribution centers. Each unit normally conducts its own local negotiations concurrent with the national bargaining.

U.S. Industry Sales and the Negotiations Cycle
Industry sales citations all reflect total U.S. industry, including medium and heavy trucks, which is how Ford reports industry sales. The years highlighted in blue below indicate contract talks between the UAW and Ford.

U.S. Vehicles Sales

For more than a decade, Ford has been disciplined about matching production with customer demand. Volatility and disruption in the auto industry during the past 14 years has affected Ford’s business and, as a result, its negotiations and contracts with the UAW.

When Ford and the UAW negotiated in 2007, the U.S. industry was coming off an extended string of 17-million unit sales years when sales slipped to 16.4 million units, foreshadowing the severe decline that was to follow in the 2008-09 recession. In 2009, when the UAW contract was reopened for negotiation, the industry had fallen an additional 35 percent, bottoming out at 10.6 million units.

When the two sides negotiated in 2011, the industry was beginning a slow recovery, with total industry sales just clearing 13 million units that year, 25 percent below the pre-crisis peak.

By negotiations time in 2015, the industry had fully recovered and achieved a new record of annual sales topping 17.8 million units.

Since that time, the industry has plateaued, with vehicle sales leveling off at 17.5 million in 2016 and 17.3 million each of the last two years, with some economists predicting another recession in the coming years.

Ford must be ready for the next downturn, whenever it comes.

 

2015 UAW-Ford Contract Commitments
In the 2015 contract, Ford committed to invest $9 billion in its U.S. plants and create or retain 8,500 U.S. hourly jobs. The company exceeded those commitments.

 

Employment Information

Hourly Employment
This chart traces Ford’s U.S. hourly employment levels during the past 14 years. These figures represent the number of UAW-represented employees covered by the Collective Bargaining Agreement on the employment roll each year from 2004 to 2018. The years highlighted below are specific to contract talks between Ford and the UAW.

Number of UAW-Represented Hourly Employees

There are four categories of hourly employees:

  • Legacy employees, permanent full-time employees hired prior to Nov. 19, 2007.
  • Skilled Trades, permanent full-time employees who have received special training and work as an apprentice or journeyperson.
  • In-Progression employees, permanent full-time employees hired on or after Nov. 19, 2007.
  • Temporary employees, hired to supplement the permanent full-time workforce.

The following reflects the breakdown of Ford’s hourly employees by category. Approximately 40 percent of Ford’s current hourly employees were hired after 2011 – these are the in-progression and temporary employees.

Employment Information - Comparison

 

WAGES

Legacy Employees
Throughout the 2015 contract period, Ford’s legacy employees, including skilled trades, received base wage increases totaling approximately 6 percent and were eligible for more than $54,000 in bonuses and profit sharing, on average.

Legacy Wages and Profit Sharing/Bonuses

In-Progression Employees
Ford’s in-progression employees received average annual base wage increases of approximately 7.4 percent and were eligible for approximately $49,000 in bonuses and profit sharing during this contract.

The 2015 contract eliminated what many once referred to as a “two-tier” system and now gives in-progression employees a way to progress toward legacy wages in a seniority-based system. Prior to the 2015 contract, wages for entry-level employees hired after Nov. 19, 2007, were capped at $19 per hour, regardless of how many years they worked. Now, those same type of employees reach legacy wage rates after eight years under this seniority-based system.

This chart also shows the starting and ending hourly wage rates for in-progression employees.

In-Progression Wage Increase

Temporary Employees
Temporary employees are eligible for health insurance after 90 days on the job and are eligible to participate in the defined-contribution retirement system and life insurance program.

At the end of 2018, Ford employed approximately 3,400 temporary workers. At the same time, Ford had hired approximately 3,400 temporary employees into full-time positions during the course of the 2015 contract.

Temporary employees hired after Nov. 23, 2015, can reach the top of their wage scale after 208 weeks on the job and receive annual average wage increases of about 5.1 percent for every 52 weeks worked.

Temporary Wage Increases

 

Labor Costs

Hourly Labor Costs

Labor costs can be defined and measured in a number of ways. One of the most meaningful measures is total average hourly cost to the company per hour worked. This includes all dollars paid to employees, the cost of contractual benefits for employees and the cost of statutory payments, such as Social Security and workers’ compensation – all calculated on the basis of hours worked by employees. This measure of labor costs also includes a net credit for past service pension. This credit is related to how we account for pension portfolio returns. In Ford’s case, the average all-in hourly cost to the company is approximately $54.

Another way to measure labor cost is to use the average active hourly labor cost, which excludes the net impact of past service pension accounting. Active labor cost is a measure of the actual cash impact of our labor cost. In Ford’s case, the average active hourly labor cost is approximately $61 – about $11 higher than transplant automakers, or foreign automakers that build vehicles in the U.S.

Much of the cost difference is driven by the significantly higher number of temporary employees foreign automakers utilize to build vehicles in the U.S.

Despite having a higher hourly labor cost, Ford exceeded its commitment to invest $9 billion in its U.S. plants and create or retain 8,500 U.S. hourly jobs during the 2015 contract.

U.S. Hourly Labor Costs

Using the total average active hourly labor cost to the company, Ford’s active labor cost of approximately $61 per hour is a compilation of the hourly labor cost for all employee categories. Those costs are detailed below.

U.S Hourly Labor Costs - 2018 Blended Per Hour

The following chart reflects the breakdown of Ford’s hourly UAW-represented employees by category as noted above.

Ford U.S Hourly Employee Breakdown

 

 

Benefits

UAW-represented full-time hourly employees do not pay any healthcare premiums or deductibles. According to a 2018 survey by the International Foundation of Employee Benefit Plans, just 7 percent of employees in the U.S. do not pay a deductible for single or family coverage. The survey drew responses from more than 675 companies representing 20 different industries.

If UAW healthcare remains the same, Ford’s annual healthcare expense for active UAW hourly employees is expected to top $1 billion in 2020. In that instance, forecasted increases would result in added costs of approximately $3 per hour per employee during the course of the next contract.

Healthcare - Comparison

Most U.S. employees across a variety of transportation companies in the U.S. pay an average of 33 percent of the total cost of their family’s healthcare, according to Willis Towers, Watson. However, Ford’s UAW-represented hourly employees pay just 3 percent of the total cost of their healthcare. That 3 percent is comprised mainly of minor co-pays for pharmaceuticals and doctor visits.

Employer vs. Employee Cost Share

 

Retiree Healthcare Benefits – VEBA
Effective Dec. 31, 2009, Ford fully settled its UAW post-retirement healthcare obligation by contributing $14.8 billion in assets to the UAW VEBA trust. In exchange for these assets, Ford irrevocably transferred its obligation to provide retiree healthcare for eligible active and retired UAW-Ford hourly employees and their eligible spouses, surviving spouses and dependents to the UAW VEBA trust.

Opioid Education: UAW-Ford Campaign of Hope
According to the Centers for Disease Control, opioid overdoses send an average of 1,000 people to the hospital every day and claim more than 40,000 lives every year. The UAW and Ford created the Campaign of Hope in 2017 as a way to counteract the growing opioid addiction crisis. A cross-functional team develops ways to educate and help employees about this issue and others.

The program teaches participating employees what to look for if they suspect a co-worker or family member has an opioid issue and what they can do about it.

 

PROFIT SHARING

Profit Sharing Plan
The profit sharing plan was first negotiated between Ford and the UAW in 1982. It provides an additional source of income for employees, allowing them to share in the growth and success of the company. A simplified profit sharing formula was introduced with the 2011 Collective Bargaining Agreement. Over the 2015 UAW contract, eligible employees received an average of $8,350 each year, for a total average of approximately $33,400 before taxes.

Eligibility
Full-time U.S. hourly employees are eligible, including certain employees who are terminated during the year.

Total Profit Share Determination
Each year company profits are generated, Ford makes profit sharing payments, providing Ford’s North America pre-tax profits exceed $1.25 billion for the plan year.

The profit sharing amount is calculated based on North America profits on a pre-tax basis excluding special reconciling items that management reports to its shareholders. The formula generates an amount equal to $1 for every $1 million of North America pre-tax profit for each eligible employee who is compensated for 1,850 hours or more within a given plan year.

Individuals compensated less than 1,850 hours will generate a pro-rated contribution to profit sharing. The total profit sharing amount is then distributed to individual participants based upon their individual compensated hours and the total compensated hours of all participants.

UAW-Ford Hourly Profit Sharing Payment History

 

PENSION PLAN

UAW-Ford Retirement Plan

  • First negotiated pension plan for hourly employees in the auto industry
  • Funded entirely by company contributions
  • Adopted in 1949 and effective March 1, 1950
  • Transitioned to defined-contribution plan for new hires in 2007 for production employees and 2011 for skilled trades with a company contribution per payroll
  • Analysis shows defined-contribution plan will provide returns equal to pension payments
  • Provided a maximum combined monthly benefit (benefit class code D retirement) for retirement at 30 years’ company service:
    • $100 for retirement in 1950
    • $3,791 for retirement in 2018

Significant improvements to the plan over the years include:

  • Supplemental allowances payable to those retiring prior to attaining eligibility for Social Security benefits
  • Payment of survivor benefits to spouses of participants
  • Special early retirement benefits payable for retirement under mutually satisfactory conditions
  • Disability pension benefits payable to employees under age 65 with at least 10 years’ service who became totally and permanently disabled or unable to perform any work at the plant or plants at which they have seniority
  • A deferred vested benefit payable at 65, or earlier on a reduced basis, to former employees who had 10 or more years’ creditable service (or Employee Retirement Income Security Act service) at the time they broke seniority with the company (five years, if employed after Jan. 1, 1989)

 

Ford Motor Company Key Statistics

Ford employs approximately 55,000 U.S. hourly employees, more than any other automaker. Ford Motor Company’s hourly UAW-represented employees work in seven types of facilities across the United States. They include:

Manufacturing Operation – Assembly Plants
The company’s U.S. assembly plants receive parts and components from suppliers, both within and outside the company, and assemble them into finished cars and trucks.

Manufacturing Operation – Engine, Transmission, Stamping, Casting Plants
The company’s U.S. manufacturing plants manufacture, fabricate and ship parts or component assemblies to assembly plants or parts distribution centers.

Automotive Parts Distribution Centers
U.S. facilities receive inventory and store automotive parts for distribution to dealers and other distributors.

Research and Engineering Facilities
Ford’s research and engineering facilities conduct advanced research in new vehicle concepts, powertrains and vehicle systems. Research and development of manufacturing processes, materials, environmental controls, polymers and catalysts also are conducted at these facilities. New methods of recycling, alternative fuel vehicles, voice-activated technologies and leading safety initiatives are just a few items that are evaluated at these facilities.

 

U.S. Facilities and UAW Representation by State 

Ford U.S. Facilities with Hourly Employees Covered by the UAW-Ford National Agreement 
At the end of 2018, Ford employed 55,461 total hourly on-roll UAW-represented hourly employees.

U.S. Assembly Plants - Vehicle Operations

 

U.S. Manufacturing Plants - Stamping and Powertrain Operations

 

Manufacturing-Related Facilities

 

Ford Customer Service Division

 

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