While GM and Chrysler have already negotiated with the UAW to bring an end to the jobs bank program (as required by GM and Chrysler’s federal bailout announced in December), Ford is still negotiating with UAW about an end to the program. Ford didn’t take a bailout, but still wants to end the program to gain a better financial footing. The jobs bank program continues paying 95% of wages and benefits to auto workers whose plants have closed, and costs Ford millions each year.

In order to begin negotiations with Ford on the matter, the UAW required the Detroit company to enter negotiations with its bondholders for concessions. GM and Chrysler are required to undergo similar bondholder concession talks by terms of the federal bailout. With no bondholder talks yet, Ford can’t announce a set date for an end to the jobs bank; UAW allowed Ford to announce an agreement had been reached to settle concerns about the company. The UAW wants the bondholders to split a “shared sacrifice.”

The UAW has also asked for its own representation on the Ford board of directors, in exchange for the union agreeing to allow retiree pensions to be bonded through company stock rather than outright cash.

According to The Detroit News, Ford actually has little chance of succeeding at renegotiating debt with its bondholders, because it has little to offer those bondholders in return.

GM and Chrysler are required by the federal bailout to renegotiate terms on two-thirds of their debt obligations, a process they’re undergoing right now; if they are unable to settle on terms with their lenders, the companies would be unable to qualify for further bailout funds and will sink into bankruptcy. Ford cannnot threaten bondholders with the prospect of bankruptcy, since it is on more solid financial footing than either GM or Chrysler.

Insiders point out that Ford needs only to win small concessions to take to UAW President Ron Gettelfinger to in turn show its union workers that they’re not the only ones conceding terms.

Shelly Lombard, a Gimme Credit analyst, responds that bondholders have little reason to concede terms to Ford at this time; they could wait and see if the bonds decline in value, at which point in time Ford might ask for its own bailout from Washington, which would probably mandate (as with GM and Chrysler now) that Ford restructure the debt. Although bondholders might object to taxpayers receiving equity in the company and having to follow federal mandates in order to receive the bailout cash, Lombard says: “If I was a bondholder, I’d wait it out. There’s almost an incentive not do anything now.”

A Ford insider concludes: “Everything is trickier for us because we’re not doing this under the auspices of the federal government. But we still wouldn’t rather be GM.”

Ken Lewenza, head of Canadian Auto Workers (CAW), urged the UAW not to accept any cuts in wages or benefits during United Auto Workers’ upcoming negotiations with the Big Three auto companies in light of the financial problems facing the industry and the $17.4 billion bailout offered to the auto companies by the Bush administration.

Lewenza said that he hoped incoming American President Barack Obama would rescind requirements that the auto companies cut wages and benefits when Obama takes office on January 20th.

Lewenza stated:

“I’m hoping on Jan. 20 president-elect Obama will recognize that the challenges in the auto industry aren’t the result of collective bargaining issues. It’s a global financial crisis, it’s market conditions. The wage rates that the UAW have are competitive.”

Mark Meldrum of the University of Windsor in Canada pointed out that UAW workers’ jobs require few skills and those workers will probably see pay cuts of $10 an hour: “They will be paid what they’re worth.”

The CAW split off from the UAW in 1985.

President George W. Bush announced that he would provide low-cost loans to GM and Chrysler, provided that they can create a plan for “viability” in the next three months. Chrysler and GM have said they would have to declare bankruptcy without the loans, with major payments due to suppliers in January that they can’t pay for.

Two of the Big Three will receive $17.4 billion in exchange for certain wage concessions. If at the end of three months the two companies have not submitted a viable plan for stability, the government will “call its loans regardless.” The government can also take 20 percent stakes in the companies in exchange for the loans if it decides to do so. The terms of the loans can be changed by incoming President Barack Obama, since the bailout was done on executive order and not through Congress. Obama said that he agreed with Bush’s move to bail out the auto industry.

General Motors gets a larger chunk of the first bailout outside of the financial industry, $9.4 billion, while Chrysler gets $4 billion.

Why was Ford left out? Ford has said it doesn’t need “immediate assistance” and might be waiting on the sidelines for a relief package from Congress with fewer strings attached.

The billions will come from the $700 billion Troubled Asset Relief Fund (TARP), the “Wall Street bailout” approved with discretion to be doled out by the Treasury. Carmakers will become eligible for $4 billion more in February.

As a condition of the loans, Bush said that auto workers will be forced to accept “competitive” compensation with that of foreign auto companies in the United States. Other conditions are:

-No bonus payments to the top 25 executives
-Bondholders have to swap their bonds for bonds worth much less than the ones they hold, with two-thirds of GM and Chrysler’s debt required to be restructured
-End union benefits that continue to pay laid-off workers’ salaries for two years, called the “jobs bank” program
-Companies must issue new stock to pay for underfunded health funds administered by UAW

These conditions would decimate the value of current carmaker shareholders’ stock.

GM’s CEO, G. Richard Wagoner Jr., said that GM “helped build the country” and that the bailout would allow GM to restructure.

Some questions to ponder:
Will the loans keep Chrysler and GM from declaring bankruptcy or simply postpone the inevitable?
How will the bailout encourage consumers to buy cars when they’re simply not doing so right now?

The UAW has agreed to make concessions on a health care trust and in a rule requiring the Big Three to continue to pay 95 percent of an employee’s salary even if their plant has closed down entirely.

The contract stipulation has cost GM, Ford and Chrysler millions of dollars and has been blamed for contributing to Detroit’s current economic woes.

The pay arrangement was confirmed by Chrysler chief Robert Nardelli in hearings before Congress last week, when Nardelli confirmed that Chrysler was still responsible for 95% of an employee’s salary, whether the employee’s plant was open or not. Under the plan, called the Jobs Bank, employees receive 95% of their salaries for the rest of their lives if their plant closes. The program was established more than 20 years ago.

None of the companies have revealed just how much they’ve spent on Jobs Bank, but in four-year labor contracts signed in 2003, GM set aside $2.1 billion for the program, Ford $944 million and Chrysler $501 million.