November 30, 2015 / 1:33 PM / 2 years ago

Foreign carmakers to keep price edge as Ford faces higher labor costs

DETROIT (Reuters) - Foreign automakers with plants in the United States will be able to offer lower vehicle prices as Ford Motor Co faces continued higher labor costs under a new four-year contract with its U.S. union workers.

A Ford logo is seen during preparations for the 2014 LA Auto Show in Los Angeles, California November 18, 2014. REUTERS/Lucy Nicholson

Ford said on Monday a labor cost gap of $8 to $10 per hour will remain with nonunion automakers such as Toyota Motor Corp and Hyundai Motor Co under the new labor deal. This will allow the foreign companies to offer more attractive options while keeping vehicle prices competitive with the unionized Detroit Three automakers, or charge less for their vehicles.

Ford Chief Executive Officer Mark Fields said the new agreement with 53,000 U.S. workers brings the company’s labor costs on par with crosstown rival General Motors Co and closer to that of Fiat Chrysler Automobiles - the other unionized U.S. automakers.

Labor costs will rise during the life of the agreement with the United Auto Workers by less than 1.5 percent annually, in line with expected inflation, Ford executives said on a conference call with analysts and reporters.

Ford said it will incur $600 million in expenses this year from the new contract.

Cost increases will be kept in check by “significantly” greater use of temporary workers who make less than full-time employees, said Bill Dirksen, Ford’s labor chief. He would not specify the rising number of temp workers.

Under the new contract, the UAW must approve the use of temporary workers, which will keep their numbers from rising to the level used at non-union plants.

Fields said Ford can leverage its global manufacturing footprint to boost its competitiveness in North America.

“In this contract, we’re not restricted from sourcing products anywhere in the Ford world for sale in the U.S. as long as we’re meeting our U.S. sourcing commitment,” said Fields.

While Fields did not specific models, Ford, for instance, could import the EcoSport, a small SUV it makes in several places including Brazil.

Ford’s hourly labor costs will rise to $60 from $57, GM’s to $60 from $55, and Fiat Chrysler’s to $56 from $47 by 2019, when the agreements between the Detroit Three and the UAW run out, according to the Center for Automotive Research, an industry consultancy.

Last year, Ford’s U.S. labor costs were $9 higher than Toyota’s and $16 higher than Hyundai‘s, the consultancy said.

UAW Ford workers ratified the new pact on Nov. 20.

Editing by Jeffrey Benkoe

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