MM2004
09-30-2011, 09:08 AM
Ford Motor Co. and the United Auto Workers will continue negotiating today toward a contract that Ford hopes will help it regain investment-grade status and resume dividends to its stockholders.
Standard & Poor's Rating Services raised General Motors Co.'s rating from BB- to BB+ Thursday, based on a contract the automaker said would increase its labor costs by 1 percent each year of the four-year pact.
And in anticipation of a contract modeled on GM's, S&P said it is poised to boost Ford's credit rating by two rungs as well — putting both automakers at just below investment grade.
Ford talks are believed to be nearing an end, but negotiators broke late Thursday night without reaching a tentative agreement.
The UAW has bargained for bonuses, jobs and other incentives to reward its members for helping Ford survive an industry crash that knocked GM and Chrysler into bankruptcy.
With lesser matters resolved, negotiators for Ford and the union were focused on economic issues Thursday.
Ford's 41,000 hourly workers are demanding a richer contract than GM's because Ford avoided bankruptcy and a government bailout. All 48,500 GM hourly employees stand to get at least $12,500 in bonuses and profit sharing in the pact ratified this week.
The government bailout barred the UAW from calling a general strike against GM or Chrysler, but Ford workers are under no such restriction.
In Thailand Thursday, Ford CEO Alan Mulally reconfirmed Ford's plans to add 7,000 U.S. jobs by the end of 2012, including 750 salaried workers.
Job creation was key to ratification of the GM deal, which granted wage increases only to entry-level workers.
Regaining the investment-grade status that it lost in 2006 and resuming stockholder dividends have been priorities at Ford.
S&P said it plans to boost Ford's credit rating to a notch below investment grade if its contract is "resolved and ratified, and the outcome does not place Ford at a significant disadvantage" among automakers, said credit analyst Robert Schulz.
The credit news was well received at Ford and GM.
"We continue to make great progress on our plan, and we are pleased with this positive step," said Ford spokesman Todd Nissen. "Ultimately, the credit rating agencies determine when we return to investment grade. Our job is to stay focused on making progress on our plan."
Said GM's chief financial officer, Dan Ammann: "We are pleased that S&P has recognized the progress we are making."
Another investment ratings house, Moody's Investors Service, said last week it is considering upgrading GM. Moody's has both Ford and GM at two notches below investment grade.
Ford officials have said they expect to resume dividends as soon as the end of the year.
S&P noted there is some risk that a new Ford-UAW contract could hurt the automaker's continued profitability, or that hourly workers might not approve a proposed deal — forcing the two sides back to the table.
"If either of these scenarios were to occur, any upgrade could be less than the expected BB+/stable," Schulz said.
Chrysler negotiators continue to talk with their UAW counterparts; the Auburn Hills automaker is expected to finalize its negotiations after Ford. Hourly employees at Ford are working on an indefinite contract extension; Chrysler's contract was extended to Oct. 19.
Source: (c) 2011 Detroit News. Provided by Proquest Information and Learning. All rights reserved. A service of YellowBrix, Inc.
Standard & Poor's Rating Services raised General Motors Co.'s rating from BB- to BB+ Thursday, based on a contract the automaker said would increase its labor costs by 1 percent each year of the four-year pact.
And in anticipation of a contract modeled on GM's, S&P said it is poised to boost Ford's credit rating by two rungs as well — putting both automakers at just below investment grade.
Ford talks are believed to be nearing an end, but negotiators broke late Thursday night without reaching a tentative agreement.
The UAW has bargained for bonuses, jobs and other incentives to reward its members for helping Ford survive an industry crash that knocked GM and Chrysler into bankruptcy.
With lesser matters resolved, negotiators for Ford and the union were focused on economic issues Thursday.
Ford's 41,000 hourly workers are demanding a richer contract than GM's because Ford avoided bankruptcy and a government bailout. All 48,500 GM hourly employees stand to get at least $12,500 in bonuses and profit sharing in the pact ratified this week.
The government bailout barred the UAW from calling a general strike against GM or Chrysler, but Ford workers are under no such restriction.
In Thailand Thursday, Ford CEO Alan Mulally reconfirmed Ford's plans to add 7,000 U.S. jobs by the end of 2012, including 750 salaried workers.
Job creation was key to ratification of the GM deal, which granted wage increases only to entry-level workers.
Regaining the investment-grade status that it lost in 2006 and resuming stockholder dividends have been priorities at Ford.
S&P said it plans to boost Ford's credit rating to a notch below investment grade if its contract is "resolved and ratified, and the outcome does not place Ford at a significant disadvantage" among automakers, said credit analyst Robert Schulz.
The credit news was well received at Ford and GM.
"We continue to make great progress on our plan, and we are pleased with this positive step," said Ford spokesman Todd Nissen. "Ultimately, the credit rating agencies determine when we return to investment grade. Our job is to stay focused on making progress on our plan."
Said GM's chief financial officer, Dan Ammann: "We are pleased that S&P has recognized the progress we are making."
Another investment ratings house, Moody's Investors Service, said last week it is considering upgrading GM. Moody's has both Ford and GM at two notches below investment grade.
Ford officials have said they expect to resume dividends as soon as the end of the year.
S&P noted there is some risk that a new Ford-UAW contract could hurt the automaker's continued profitability, or that hourly workers might not approve a proposed deal — forcing the two sides back to the table.
"If either of these scenarios were to occur, any upgrade could be less than the expected BB+/stable," Schulz said.
Chrysler negotiators continue to talk with their UAW counterparts; the Auburn Hills automaker is expected to finalize its negotiations after Ford. Hourly employees at Ford are working on an indefinite contract extension; Chrysler's contract was extended to Oct. 19.
Source: (c) 2011 Detroit News. Provided by Proquest Information and Learning. All rights reserved. A service of YellowBrix, Inc.