Ford Motor Co., which is facing a deepening financial crisis, is likely to save over a $1 billion a year in health care costs under an agreement with the United Auto Workers union, analysts said.
The UAW Saturday said it had agreed to higher payments for health care for hourly employees at Ford, in a move to help stem the automaker’s growing losses in North America.
The tentative agreement, still subject to ratification by rank-and-file members of the UAW at Ford, was widely expected following an October deal between the union and General Motors Corp.
Applying the GM changes to Ford’s active and retiree populations, the agreement will generate annual cost savings of about $1.05 billion, or about 40 cents per share, Deutsche Bank analyst Rod Lache said in a note to clients Sunday.
Ford has said it expected to spend about $3.5 billion in health care this year.
The UAW is hoping to release details of the deal on Wednesday following a meeting between the union’s top brass and local officials in Detroit, UAW spokesman Paul Krell said.
One local union official said preliminary reports suggest that the deal concessions in health care costs appear similar to those given to GM.
Bear Stearns analyst Peter Nesvold estimates the Ford health care deal should save the automaker about $1.6 billion, or 51 cents a share per year.
Nesvold said the pact with the UAW is likely to reduce Ford’s total health care liabilities by about $7.8 billion, or 20 percent.
Ford spokeswoman Marcey Evans declined to comment on the details of the new accord.
Pressure on Ford is intense, with imports cutting into its market share, sales of sport utility vehicles stalled and raw material costs rising.
So far this year, Ford’s North American unit has lost more than $1.4 billion before taxes. Ford has said it would announce a comprehensive restructuring plan in January to restore North American operations to profitability.
GM said in October the pact with UAW, which was later ratified by the workers, would reduce its employee health care expenses by $3 billion annually before taxes.
“Our sense was a Ford deal was inevitable after GM’s agreement with the UAW,” Nesvold said, adding that a deal with DaimlerChrysler AG’s Chrysler Group is probably next.
