US:Ford slashes benefits for U.S. salaried workers and retirees
Ford slashes benefits
No raises, big health care cuts for salaried staff
David Shepardson / Detroit News Washington Bureau
Benefit changes for Ford salaried workers and retirees include:
Raises suspended for 2007.
Health care coverage to be cut in 2008 for retirees and surviving spouses who are 65 and older or eligible for Medicare. Ford will pay $1,800 a year for supplemental coverage to Medicare. No coverage for dependents.
Matching contributions to 401(k) accounts reinstated June 1, with Ford contributing 60 cents on the dollar, up to 5 percent of an employee's base salary.
Vesting period for retirement cut to 3 years from 5 on Jan. 1.
Monthly health care contributions to go up an average 30 percent. Deductibles, drug co-pays rise.
Changes to sick days, disability, long-term care insurance and other policies.
Ford Motor Co., struggling to preserve cash amid deep losses, launched a sweeping new round of benefit cuts Wednesday for U.S. salaried workers and retirees.
The cutbacks, according to information packets distributed to workers and obtained by The Detroit News, include two especially painful measures:
The elimination of company health insurance for Medicare-eligible salaried retirees in 2008 and the suspension of merit pay raises for salaried workers next year for the first time in 13 years.
In addition, the automaker is hiking health care premiums in June 2007 for the vast majority of salaried workers by about 30 percent -- the second straight year of such increases.
The benefit changes included some good news -- Ford will begin a partial match on employee 401(k) contributions next year.
Overall, the moves will save hundreds of millions of dollars and send a signal to the United Auto Workers that all employees must make sacrifices to help revive Ford. Detroit's automakers enter crucial labor negotiations with the UAW next year.
Ford lost $5.8 billion in the third quarter of this year and is mired in possibly the deepest crisis in its 103-year history. The company is burning cash quickly -- an estimated $6 billion in the second half of this year -- stoking fears of a liquidity crunch.
In response to relentless market share declines, the company is in the midst of shedding 14,000 salaried workers and 30,000 hourly workers in North America.
Ford this week began offering buyouts to senior managers in nine of 15 business units.
Ford will offer salaried buyouts in the remaining six departments and to some lower-level salaried employees in all departments in December, a spokeswoman said.
While the buyout offers were expected, the breadth of the benefit reductions left many salaried employees and retirees shaken Wednesday.
"Morale is in the tank," said one Ford manager who asked not to be identified.
In 2008, the Dearborn automaker will stop providing traditional health coverage for salaried retirees over 65 who are eligible for Medicare, replacing it with a $1,800 annual stipend that they can use to buy supplemental coverage through a Health Reimbursement Agreement or to directly pay out-of-pocket medical costs.
Ford said the Medicare coverage plus the $1,800 supplement should give retirees coverage comparable to what they have now and allow the company to reap significant savings.
Ford also will stop paying for any health care coverage for dependent children of Ford retirees over 65 -- which will primarily affect college-age individuals. Dependents can get coverage until they are 25 if they meet certain criteria. Ford spokeswoman Marcey Evans declined to say how many people would lose coverage.
DaimlerChrysler AG's Chrysler Group also is moving older salaried retirees to health accounts and providing $1,750 a year per retiree. Chrysler also is requiring salaried retirees to pay between 50 percent and 100 percent of premium increases. The moves have caused an uproar among Chrysler retirees.
According to the informational packets, the health care moves include coverage changes and increases in employee monthly contributions, deductibles, and co-pays for various health care plans.
For example, Ford is eliminating private home nursing on some plans and partial coverage of erectile dysfunction drugs such as Viagra. It's also paring dental benefits.
Ford spent $3.5 billion to provide health care in 2005 for 590,000 employees, retirees and dependents.
Two-thirds of Ford's health care costs in 2005 went to retiree health care; total health care costs are up 67 percent since 2000 and retiree costs accounted for 80 percent of the increase.
Ford Americas President Mark Fields said in an e-mail to employees Wednesday that cancelling merit pay for next year is "difficult but necessary."
Since at least 1993, Ford has offered a pool of money for merit raises -- though it excluded the highest-level employees from merit pay in 2003. Last May, Ford awarded its employees merit pay raises from a pool that accounted for 3 percent of salaried payroll.
In addition, salaried employees will see their December paycheck delayed by one week -- from Dec. 22, the date of the holiday shutdown -- until Dec. 29. Ford traditionally paid salaried employees early in December in consideration of holiday expenses. The move allows Ford to delay its payment of federal withholding taxes until January.
"This change alone will save the company $70 million of cash flow this year without reducing compensation to employees," Fields said in the e-mail.
General Motors Corp said it would cap the amount of money it spends on salaried retiree health care at 2006 levels, but hasn't moved to eliminate supplemental retiree health insurance.
Paul Fronstin, a senior researcher at the Washington-based Employee Benefit Research Institute, said the retiree cuts were to be expected.
"Employees are cutting back left and right, and across the board retirees are getting whacked," Fronstin said.
Evans said Ford conducted a "very careful, thorough review" to ensure that it offers competitive benefits. Ford surveyed employees earlier this year to determine the benefits they most valued. Matching funds for 401(k) was one benefit employees said they wanted, Ford said.
Ford also announced new disability, bereavement and sick leave policies. Ford will pay for only 10 sick days in a calendar year, and they won't carry over.
On the positive side, Ford will begin next year contributing 60 cents per dollar up to 5 percent of an employee's base salary in the 401(k) program.
Unlike in years past, Ford will not automatically pay the match in Ford stock.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....