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CAW Favors Ford Contract
The Canadian Auto Workers (CAW) union at
Ford Motor Co. ( F - Analyst Report) has voted in favor of the four-year labor agreement with the company. The union stated that 82% of its Ford members accepted the deal. However, it did not reveal how many of its 4,500 workers at Ford cast ballots.
The CAW union also reached a tentative agreement with General Motors Company ( GM - Analyst Report) last week. The ratification meetings for that agreement will begin on September 26. The wages would take 10 years instead of 6 years to reach the highest level.
Under the Ford and GM agreements, workers will be paid 60% (instead of 70% previously) of the highest hourly wage rate of C$33.89 (US$34.74), which means $20.33. They also include lump-sum bonuses for workers but Ford suspended the cost-of-living adjustment bonus for the first three years.
Ford said the deal would create 600 jobs in Canada and help the company save costs by paying lower hourly wages to new hires. The CAW union is yet to reach an agreement with Chrysler, controlled by Italy’s Fiat SpA . Chrysler operates the largest facility in Canada.
According to the Detroit automakers, Canada is considered to be the most expensive country in the world for manufacturing cars. The CAW union represents about 21,000 workers in Canada and contributes 16% of vehicle production in North America.
Ford, a Zacks #3 Rank (Hold) stock, posted a 39% fall in profits of $1.20 billion or 30 cents per share in the second quarter of the year from $1.98 billion or 49 cents in the corresponding quarter of 2011 due to lower operating results in all the regions except North America. However, the company’s profits were higher than the Zacks Consensus Estimate of 28 cents per share.
Revenues in the quarter dipped 6% to $33.3 billion, due to the same factors mentioned above. However, it exceeded the Zacks Consensus Estimate of $32.0 billion. In the first half of the year, Ford’s U.S. total market share was 15.4% in the U.S. and 8.1% in Europe.
For 2012, Ford continues to expect industry volume in the range of 14.5 million–15.0 million vehicles for the U.S. and about 14 million units for the 19 European markets covered by the automaker.
Ford anticipates market share in the U.S. and Europe to be lower than 16.5% and 8.3%, respectively in 2011. It also expects the overall pre-tax operating profit to be lower than 2011 compared with the prior guidance of tallying. Operating margin in the Automotive segment is anticipated to be equal or lower rather then the prior guidance of improve over 5.4% in 2011.
Ford reiterated its guidance of Automotive structural costs to increase by less than $2 billion in 2012 in order to support higher volumes, new product launches and global growth plans. The automaker now expects capital expenditures of $5 billion compared with the prior guidance of $5.5 billion–$6.0 billion in 2012. It expects to meet challenges in Europe and South America by executing its One Ford plan.