When the provisions of the recently inked deal between the UAW and General Motors, Ford and Chrysler go into effect in 2010, it will save the automakers an estimated $1,000 per car. At that level, if U.S. car sales remain above 16 million units per year and the Big Three retain their current market share, it would mean savings of $3.8 billion for GM, $2.4 billion for Ford and $2.0 billion for Chrysler.
According to Automotive News — who also tallied the savings per company — the new contract should benefit all three companies equally, but in different ways.
GM
Since GM has the highest number of retirees, the UAW run health care fund will benefit it the most. Morgan Stanley predicts that the new setup will generate an extra $1 billion in cash flow for GM, with Ford only seeing an additional $300 million. Chrysler will see even less, due to its lower number of retirees.
Ford
Ford is poised to benefit the most from the new two-tiered wage system. According to Automotive News, the new UAW contract allows to the automaker to replace up to 20% of its 50,000 hourly UAW workers with lower paid employees. The new contact also lets Ford pay new production workers — not just non-production workers — at the lower wage rate.
The UAW also gave Ford more power to require laid-off workers to accept jobs at other factories or to leave the company — a move that will save Ford money by not paying employees to do nothing.
Overall, the two-tiered wage system could save Ford as much as $2 billion. In contrast, the same system will only save GM about $700 million.
Chrysler
While Chrysler won’t benefit financially equal to GM and Ford, the automaker is set to gain from its lack of future product promises. By not guaranteeing future models or even production facilities, it gives Chrysler the flexibility to produce the vehicles it sees fit for the market and allows for inventory control in order to sustain its North American turnaround. Chrysler announced the production end of several models last month, with further cutbacks likely.
But even with the concessions given by the UAW, domestic automakers are not guaranteed a North American turnaround. “The industry is still in a pickle,” said Dave Cole, chairman of the Center for Automotive Research.
