April 28, 2008 / 7:12 PM / 9 years ago

CAW and Ford Canada reach surprise labor agreement

<p>Ford Motor Company employees assemble a Ford Edge at the Ford assembly plant in Oakville, a Toronto suburb, October 16, 2006. The Canadian Auto Workers Union said on Monday it has reached a tentative three-year agreement with Ford Canada that includes a wage freeze.J.P. Moczulski</p>

TORONTO (Reuters) - The Canadian Auto Workers union said in a surprise announcement on Monday that it has reached a tentative three-year agreement with Ford Canada (F.N) that includes a wage freeze, and will form the basis for talks with other "Big Three" Detroit-based automakers.

The deal, which hinges on the completion of local agreements later this week, comes about five months before the current contract ends, and took many in the industry -- even those involved in the talks -- by surprise.

"If you'd have talked to me three weeks ago, I never would have dreamed that we'd be where we are today," said Buzz Hargrove, president of the CAW.

The deal would also see Ford Canada's assembly plant in St. Thomas, Ontario, remain open until 2011. The plant had been scheduled to close in 2010.

If it goes through, the agreement will see no change in base wages, one week less paid vacation per year, and the suspension of cost of living increases for five quarters.

It would also see a cap on the cost of long-term care for retirees, workers would pay for a bigger percentage of the cost of prescriptions, and the CAW would look at the possibility of establishing a health-care fund similar to what the United Auto Workers union agreed to in the United States, which would shift more of the health-care burden to the union.

CAW Economist, Jim Stanford, said the changes will save hundreds of millions of dollars for the automaker, which has posted multibillion-dollar losses in recent years.

"This agreement will make a direct contribution to Ford's bottom-line earnings as soon as it becomes implemented," he said.

While the deal avoids a two-tier wage system, like the one UAW agreed to last fall, it does make changes to the "new-hire grow-in system," in which new workers are hired below the base wage and then work their way up.

New hires would start at 70 percent of the base rate, and then be bumped up to 80 percent after one year, 90 percent after the second year, and 100 percent on their third year. Currently, new hires earn around 85 percent of the base rate and it only takes them two years to reach 100 percent.

Retirement incentives would be increased by around C$5,000 and those who take the package will qualify for C$35,000 towards the purchase of a new Ford vehicle.

Upon ratification of the deal, workers will receive a C$2,200 "productivity and quality" bonus. And to compensate for one week less paid vacation time each year, Ford is offering workers a one-time C$3,500 bonus in January.

If ratified -- the CAW bargaining committee voted 100 percent in favor of recommending their members vote for the deal -- the CAW will take the agreement to General Motors (GM.N) and Chrysler to try to strike out a similar bargain.

"This is the pattern for 2008 bargaining, and our history has been that once the pattern is established on economics with one company, the other two companies accept the pattern," said Hargrove.

"I do not anticipate a fight with GM or Chrysler. Quite the contrary. I think they're probably as relieved as we are today."

($1=$1.01 Canadian)

Reporting by John McCrank; editing by Rob Wilson

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