The Ford agreement was closely patterned after the October deal between the union and General Motors Corp., UAW President Ron Gettelfinger told reporters after a closed-door meeting with local union officials from across the country.
The pact, which was first announced on Saturday, comes as Ford is finalizing a comprehensive restructuring strategy for its money-losing North American operations. So far this year, Ford's North American unit has lost more than $1.4 billion before taxes.
Pressure on Ford is intense, with imports cutting into its market share, sales of sport utility vehicles stalled and raw material costs rising.
"This is a little bit of relief of one of (Ford's) many problems," Kevin Tynan, analyst with Argus Research said, adding that the concessions were in line with market expectations.
Ford still needs to deal with other pressing issues, like overcapacity, and stemming the slide in its U.S. market share, he said.
Ford expects to spend about $3.5 billion in health care this year, a 13 percent increase when compared to 2004. The automaker pays health benefits for some 550,000 white-collar workers, blue-collar workers, retirees, spouses and dependents.
Ford spokesman Tom Hoyt declined to comment on the details on the agreement with UAW.
Voting on the pact, which is subject to ratification by the UAW rank and file, is expected to end Dec. 22.
The No.2 U.S. automaker is also moving to cut the health-care benefits of Ford's white-collar employees and retirees.
Mark Fields, president of Ford's Americas business, said Tuesday in an email to salaried employees that they will see higher out-of-pocket medical expenses in 2006.
Ford would also limit the amount it contributes for retiree health care, Fields said in the email, a copy of which was made available to Reuters.
GM said in October the pact with UAW, which was later ratified by the workers, would reduce its employee health care expenses by $3 billion annually before taxes.
Like the GM deal, Ford retirees will be required to pay a maximum of $752 per year for their family health-care coverage, including monthly premiums.
The UAW said retirees with Ford pension incomes of $8,000 and less, whose Ford pension benefit rate is $33.33 per month per year of service or less, will continue to receive their health care free of charge.
Coverage of active Ford hourly employees will continue with no changes, although they will see higher drug co-payments and will have to forego future pay increases toward a retirement fund.
Ford, in turn, has agreed to spend $900 million in new technology that is not included in its current capital expenditure plan.
Gettelfinger said an agreement with the Chrysler side of DaimlerChrysler will be next.
Ford shares were trading up 6 cents, or 0.74 percent, at $8.19 on the New York Stock Exchange.