The new flexible working agreement will safeguard the future of the Essex plant until well into the next century and will enable production to rise to at least 300,000 by 2002.
In addition to the new Fiesta, due to go into production in 2001, Ford has agreed to build a second model at Dagenham, probably a small people carrier type vehicle based on the Fiesta platform.
In return, the Dagenham workforce has agreed to sweeping changes in working practices aimed at raising productivity levels by 10 per cent year on year and producing annual savings of pounds 100m.
Dagenham employs 8,000 workers - 4,500 in car production and 3,500 in engine assembly. But unions estimate a further 15,000 to 17,000 jobs in supply companies will be safeguarded by the new deal, which was approved at mass meetings of the Dagenham workforce on Tuesday.
The key features of the Modern Operating Agreement signed by the company and its main unions are:
n New labour mobility and multi-skilling arrangements enabling workers to do different jobs around the plant.
n A reduction in overtime and introduction of flexible working with variable shift patterns and staggered start and finish times.
n More flexible holiday rotas so that employees take more time off early in the year.
n Fresh measures to curb absenteeism including interviews with workers when they return from sick leave.
The new agreement replaces the so-called Blue Book - a 200-page bible that has laid down working practices at Dagenham for decades.
Although the Dagenham workforce will not have anything quite as formal as the working hours account set up at Rover's Longbridge plant, they will be expected to work longer hours when demand is high and shorter hours during traditionally low periods of demand.
Ken Jackson, general secretary of the AEEU engineering union, welcomed the agreement saying: "This secures 25,000 jobs and demonstrates the tangible benefits of partnership. Dagenham is already a highly productive plant and with the addition of a second model it will be able to compete with the best in Europe."
Steve Turner, an official of the Transport and General Workers Union, described the deal as "an historic turning point in Dagenham's fortunes".
The T&G convenor in the Dagenham body plant, Keith Elcock, meanwhile said the agreement had put to rest speculation about the future of Dagenham which had persisted for the last 30 years.
Although Ford had already nominated Dagenham as the lead plant for the new Fiesta, its lack of a single-sourced second model has always left the site vulnerable. In addition, Dagenham has been on short-time working since last October because of the collapse in the European export market which traditionally accounts for 45 per cent of its production.
Under the new agreement, Ford has undertaken to provide enough capacity to build 150,000 of the second model and increase the installed capacity of the plant from 272,000 to 300,000.
But unions are optimistic that if the new Fiesta proves as popular as the existing model, currently Britain's biggest selling car, then production could rise to well over 300,000. This would involve the introduction of a third shift, creating several hundred new jobs.
The agreement also provides for a "fair balancing" of production of smaller B-class cars between Dagenham and Cologne in Germany, the other manufacturing site for the Fiesta. This guarantees that any increase in European demand will be met partially from the UK plant.
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