Ford Chose Higher Profit Sharing

DETROIT ( TheStreet) -- Ford ( F) is paying its workers 66% more in profit sharing that its UAW contract requires.

The Detroit Free Press reported Friday that a strict interpretation of the automaker's profit sharing formula would have led to average payouts of $3,000. But the automaker said it will make an average profit sharing payment of $5,000 to each of its 40,600 eligible U.S. hourly employees.

"What's really important for our members to know is they didn't have to do this," UAW President Bob King told The Free Press. "They did much more than they technically would have had to do under our agreement."

Ford and the UAW have had a profit-sharing agreement since 1982. In 1999, when Ford earned $7.2 billion, the average UAW payment was $8,000, the newspaper reported. But under a 2007 contract, the profits of Ford Motor Credit were no longer included in the profit sharing formula.

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On Ford's earnings conference call, CEO Alan Mulally said "We absolutely want to be competitive in every element of our cost structure including bonuses and incentives for the company's performance.

"We'll continue each year to share in the success of Ford," Mulally said.

In a report issued Friday, in which Moody's raised the ratings outlook for Ford to positive from stable, Moody's analyst Clark wrote that "The most significant challenge facing Ford is the need to negotiate a new UAW contract in September."

Existing UAW contracts with Ford, GM ( GM) and Chrysler provided concessions that enabled the companies to restructure their way to viability. Of the three, only Ford lacks a no-strike clause in its contract. "Consequently, Moody's believes Ford will likely be selected by the UAW as the target for negotiation of a new contract that will then set the pattern for key elements of contracts ultimately reached with GM and Chrysler," Clark wrote.

He said Moody's anticipates "that a new UAW contract will continue to incorporate some form of profit sharing that enables workers to participate in the improving financial performance of the company." If Ford signs a new contract "that preserves its operating flexibility without a costly strike, and continues to strengthen its credit metrics, the company's rating could be raised," he wrote.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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