Ford Australia wants pay freeze and two-tier wages

FORD Australia is calling for its factory workers to accept a wage freeze and adopt a new two-tier pay structure as it aims to slash costs in a bid to return to profitability this year.

Documents obtained by GoAuto reveal the company is seeking the wage concession as part of new enterprise agreement currently being negotiated with representatives of the Federation of the Vehicle Industry Unions.

The Ford Australia log of claims made during the opening round of negotiations in June includes the proposed pay freeze as well as a call for a two-tier wage system that would see new employees paid less than existing workers. At this stage, there is no timeframe for the pay freeze, which would depend on the length of the agreement.

The Ford log of claims also includes a call for allowances to be frozen at 2006 rates and some to be abolished when a worker is affected by ‘market initiated change’, ‘employee initiated change’ and ‘forced transfers’.

There is also a proposal for removal of sick leave payouts and annual bonuses.

Ford Australia president Marin Burela has stated the company is determined to keep its costs in check so the company turn around its $274 million loss of 2008.

Left: Marin Burela.

After announcing another price increase for its Falcon range from July, Ford Australia is looking to trim back supplier costs as well as cut wage costs.

Mr Burela said the current economic climate meant it was not possible to justify salary increases for either Ford's blue-collar or white-collar employees, who like their counterparts at GM Holden remain under a pay freeze.

“I have been very consistent with this. We have had a management wage freeze for a long time and rightly so,” he said.

“We have put down on the table the fact that we don’t think this is the right time for us to be making demands on ourselves as a company and it terms of a group of people of growing our cost base.”

Mr Burela said the meetings between Ford and union representatives had been productive and he hoped the negotiations would conclude within the next month.

“That is not an easy conversation to have - obviously that is very difficult - but it is being met by professionalism and maturity at every level of the trade union movement,” he said.

“Where that will lead us over the next month, only time will tell.”

Mr Burela said he felt the union representatives understood the company’s position.

“There wasn’t the emotion that you might think because people genuinely understand the severity of the issues we have confronting us,” he said.

Mr Burela would not discuss the details of the various claims, but said he hoped the agreement would cover the next 18 months to two years.

“We clearly spoke about a number of things some of them were centred around the level of different financial impact on things, flexibility, we spoke about the areas that we don’t think have worked for us over the last two or three years,” he said.

The union federation is considering the pay freeze, but its initial log of claims included an annual five per cent wage increase. It has rejected the idea of a two-tier pay structure and maintains there is no way it will accept that aspect of the proposal.

A union source told GoAuto it was also looking to improve conditions for workers subjected to down-days at Ford’s plants, suggesting they be paid 90 per cent of their normal rate on those days.

“We are not insensitive to market conditions that are facing the industry at the moment,” the source said. “We think there is a capacity to make some improvements in terms of funding affected employees.”

The negotiations are taking place after a wave of job cuts including a major restructure at the end of last year which affected blue and white-collar workers at Ford’s Victorian operations.

Mr Burela said while requesting a wage freeze and other changes was not easy, the company had already made some tough calls that prevented the workforce being subjected to many down days.

“We took some very hard decisions in 2008 when we restructured the company. I was probably the least liked person in Australia at that time... I was the villain, but we did it the right way,” he said.

“If you look at our position in 2009 we have not had to react like our competitors - in terms of massive production down days we have our production set for the whole year.”

Mr Burela said Ford Australia was committed to returning to the black and said it aimed to do so soon.

“We are very focussed on finishing this year at break even or better - that is our aim,” he said.

“Our objective is to continue to improve our financial performance and we are on the road to doing that 2010 will be a very challenging year and our objective is to maintain that level of stability.”

Mr Burela said Ford Australia had already sold the next two months' supply of locally produced vehicles to dealers, which is a very different scenario to the days of excess stock.

“Our order bank for July is very healthy in fact our production is sold for July, for August and we are taking orders for September,” he said.

“Six or seven months ago you would have seen us holding, I don’t know, 8000 to 9000 vehicles on the grass with our imports and local production. Now, we have nothing on the grass,” he said.

As part of its moves to improve the bottom line, Ford Australia increased the pricing of its Falcon sedan, ute and wagon range by between $1000 and $1500 from July 1.

Mr Burela dismissed any suggestion the move was made due to the full order bank, stating that the increases was simply a reflection of the rising cost of production.

He said exchange rates did play a role, but added that the price of raw materials including steel and plastic had increased.

“There is the exchange, but also the commodities - the ups and downs of commodity prices that you can’t control,” he said.

Read more:

Ford Oz posts record $274m loss for 2008

Ford Australia increases production

Falcon is getting there, says Ford boss

Ford tweaks production again