The Canadian Auto Workers union on Monday reached a tentative contract settlement with Ford Canada that will result in some layoffs and "modest" wage and pension increases over the next three years, union president Buzz Hargrove said.

The deal with Ford sets a pattern that its Big Three competitors, General Motors and DaimlerChrysler, will be expected to accept in subsequent talks that begin Monday.

The deal calls for a wage increase of 38 cents an hour for the CAW members in the first year, 25 cents an hour in the second and another 25 cents in the final year of the three-year deal.

It's the smallest increase since 1985, said Hargrove, adding that market conditions are tough due to skyrocketing oil prices, outsourcing and intense foreign competition, all of which have hammered Ford Canada, its U.S. parent Ford Motor Co. and other North American automakers.

Hargrove said he expected an estimated 1,100 layoffs among Ford's 11,600 Ontario workers by the end of 2008, but emphasized many of those workers would be offered early retirement incentives or be put on preferential standby for any new jobs that open up.

The proposed contract must now be ratified by rank-and-file workers on Saturday. The union would then open talks with DaimlerChrysler on Monday.

Ford Canada's lead negotiator, Stacey Allerton Firth, told the Canadian press that "this is an agreement that we think is sustainable and meets our mutual needs."

Hargrove has said a strike is possible for 11,400 DaimlerChrysler employees unless the automaker backs off on plans to outsource some production work. He noted DaimlerChrysler was the only North American automaker making steady profits.

"They're demanding major outsourcing of our jobs, not because they need it but because they think they can make [products] somewhere else cheaper," Hargrove said.

Chrysler chief executive Tom LaSorda said Monday that he believes a contract agreement can be reached without a strike.

"Obviously, what we want is a responsible agreement," LaSorda said on the sidelines of the Frankfurt Auto Show. "We've always worked with the CAW and we think we can settle it without a strike."