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Ford Motor Co. (F) said Wednesday it will lower labor costs and close the pay gap with overseas rivals in two years through its new agreement with the United Auto Workers, or UAW.

The move comes as General Motors Corp. (GM) and Chrysler LLC (C.XX) seek similar wage and benefit cuts as a condition of securing more U.S. government support.

The UAW has agreed to make some concessions to GM and Chrysler, but the parties remain at odds over retiree health-care funding issues. The union ratified the Ford pact on Monday.

Ford, which is not seeking U.S. loan support, said its hourly wage and benefit costs will fall to about $55 an hour from $60. This compares with the $48 paid by overseas auto makers operating in the U.S., Ford's group vice president of global manufacturing Joe Hinrichs told reporters.

"This gets us into the ballpark where the transplants are," Hinrichs said, referring to the U.S. operations of rivals as Nissan Motor Co. (NSANY) and Toyota Motor Corp. (TM).

As part of its accord, Ford will launch a new companywide buyout of its hourly workers on April 1, running through May 22. The offers will be lower than previous programs because of the economy, Hinrichs said, without providing further details.

"Within the next couple of years, with the buyouts and with the ability to leverage some of the other tools in this agreement, we get parity with" companies like Toyota and Nissan, he added.

Ford's deal with the UAW will lower costs and improve liquidity by allowing it to use stock to fund half of its contribution to the Voluntary Employee Beneficiary Association, a union-run health-care fund.

The auto maker is expected to save $375 million this year from the contract changes covering about 42,000 union workers, rising to $500 million or more in subsequent years.

While Fordis not seeking access to the low-interest loans provided by the U.S. Department of Treasury, a $14.7 billion loss last year and a weak global auto market have seen it push for concessions similar to those being pursued by GM and Chrysler.

Its two rivals need the concessions from the UAW - and other stakeholders - by March 31 to be eligible for the $16.6 billion and $5 billion in loans they are seeking, respectively.

Hinrichs also confirmed that Ford will end production at its Wayne, Mich., plant, which builds the Ford Focus.

Focus production will be moved to a Michigan assembly plant that is being retooled to produce smaller vehicles. The plant had assembled the Ford Expedition and Lincoln Navigator sport-utility vehicles. The move will not result in any job losses.

Ford said last year that it was converting the plant in an effort to produce more small cars in the U.S. as consumers moved away from buying SUVs and pickup trucks.

Its shares recently rose 14 cents, or 7.3%, at $1.99.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com