Detroit Free Press (Michigan), September 29, 2007, Saturday

Copyright 2007 Detroit Free Press
All Rights Reserved
Detroit Free Press (Michigan)

September 29, 2007, Saturday
METRO FINAL Edition

SECTION: NWS; NEWS; Pg. 2

HEADLINE: FORD, CHRYSLER MAY SEE PITFALLS IN DEAL

BYLINE: SARAH A. WEBSTER

BODY:
As Ford Motor Co. and Chrysler LLC renew contract talks with the UAW next week, experts say they'll zero in on aspects of the General Motors Corp. deal that aren't beneficial to them and will seek better terms to help them survive.

Ford and Chrysler officials would not publicly comment about what the GM deal means for them. But others were reading between the lines of a 24-page report, released Friday, on the UAW-GM contract.

"I think there's going to have to be substantial modification in the contract for both companies," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. He said a temporary wage cut was one option.

The UAW named GM as a strike target Sept. 13. UAW President Ron Gettelfinger said he will resume talks with Ford and Chrysler next week and has said he expects them to implement essentially the same agreement as GM.

Experts said it is unclear whether the union would be willing to strike either Ford or Chrysler, as it did GM, to get a similar deal. But they said they think it is clear that Ford and Chrysler need a customized deal, regardless of Gettelfin-ger's calls for "a pattern" among contracts with automakers.

The UAW-GM deal contains many provisions beneficial specifically to GM and its UAW workforce. However, some of those terms seem potentially damaging to Ford and Chrysler.
John Casesa, a veteran auto analyst and managing partner of Casesa Shapiro Group LLC in New York, said the UAW will have to give a different deal to Ford and Chrysler if it wants to help the companies survive.

"Ford's financial situation remains fragile," Casesa said.

"Because the main feature of the agreement is relief on health care for retirees and GM has the highest ac-tive-to-retiree ratio, it's disproportionately better for GM," he said.

GM provides health benefits to more than four retirees and surviving spouses for every active worker it employs. Ford's ratio is two retirees for each active worker, and Chrysler's ratio is about one-to-one.

While GM likely will be able to move $50 billion in retiree health care liability off its books, crosstown rivals have less to gain from that move and likely will need other concessions that similarly reduce the competitive gap with foreign automakers.

For Ford, the specificity of the GM agreement could force it to provide greater clarity about its turnaround plan, which aims to make the North American division profitable by 2009, said Arthur Wheaton, a labor expert from Cornell University.

Ford lost $12.6 billion last year and is undergoing a restructuring. Chrysler lost $2 billion in the first three months of this year and majority ownership shifted to privately held Cerberus Capital Management.

Cole said he expects that Ford, when it reaches a deal with the UAW, will disclose the six remaining of 16 plants it plans to close as part of its restructuring.

Ford and Chrysler also face dealing with a component of the GM-UAW deal that allows GM to hire workers - who would be UAW-represented - for noncore jobs at lower pay.

Ford is ahead of GM in outsourcing noncore jobs, Casesa said. Over the past two years, the UAW approved what are known as competitive operating agreements at Ford plants that allowed noncore jobs to be subcontracted out at lower pay. UAW Vice President Bob King said that saved $750 million.

Now, the GM-UAW deal raises the possibility Ford might have to pay those workers more and make them Ford employees.

Despite the potential clashes, Cole and Casesa say the UAW would give Ford and Chrysler more-flexible deals within a very broad framework that they can still call "a pattern."
Contact SARAH A. WEBSTER at 313-222-5394 or swebster@freepress.com Business writers Tim Higgins and Katie Merx contributed to this report.

MEMO: UAW CONTRACT DETAILS;OTHER CONTRACT TALKS
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