Ford Slashes Pay, Health Care Coverage

November 2, 2006 ( - Looking at its biggest quarterly loss in 14 years, Ford Motor Company has announced a series of pay and benefits cutbacks affecting both active employees and retirees.

Mark Fields, chief of the Number Two US automaker’s Americas unit, told employees about the plan in a memo, according to a Bloomberg news report.

The plan includes reduced expenses for US salaried workers through the dropping of merit-pay raises, requiring bigger payments for health benefits and slashing retiree health care payouts, the news report said. The changes will take effect June 1, company spokeswoman Marcey Evans, according to Bloomberg.

Ford will force active salaried workers to chip in more in monthly health-care contributions as well as to pay higher deductibles, Evans said.

Also, the automaker will now provide salaried retirees and their spouses 65 and older $1,800 each for health care expenses. Now, the automaker currently provides such employees company-paid supplemental health insurance beyond US Medicare benefits. The affected retirees can use the $1,800 payments to purchase supplemental insurance, Evans said.

In addition, Ford will no longer provide supplemental health insurance for dependent children of retirees older than 65, Evans said.

On the salary front, active salaried employees won’t get merit-pay increases, Evans said. The raises were granted this year, she said.The company spent about $3.5 billion on US health-care expenses in 2005. Evans declined to specify what the outlay will be this year.

The one piece of good news is that Ford will reinstate matching contributions for the salaried employee 401(k) retirement plans. Ford had suspended such matching payments in July 2005. The company will pay $0.60 for each dollar employees contribute for the first 5% of a worker’s base pay.