Ford Takes $600M Beating In Q4 On UAW Contract Costs

Much of the costs that Ford racks up each year aren't for raw materials like steel and electronics to build its cars. Much of the costs that take bites out of Ford's bottom line are directly related to people and labor costs. In Q4 2015, Ford will take a massive charge to the tune of $600 million that covers signing bonuses among other things.

The costs are associated with the new UAW contract that Ford and the union works recently agreed to. While the number seems massive, Ford CEO Mark Fields is quick to point out that the contract with the UAW increases labor costs less than 1.5% per year.

In addition to covering signing bonuses, the $600 million charge also covers the cost of backdating wages to September 15 and to improve healthcare and other benefits for workers. The massive write down includes an $8,500 signing bonus for each of the 52,900 workers that are part of the $600 million plus contract.

Ford agreed to the deal on November 20 by a scant margin with 51% voting yes on the new contract. Under the new deal labor costs for Ford vehicles will remain $8-$10 per hour higher than Japanese rivals like Toyota.

SOURCE: Freep