Ford Reaches Tentative Labor Agreement with UAW

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Researched by Industrial Info Resources (Sugar Land, Texas)--Earlier this year, General Motors Corporation (Detroit, Michigan) and The Chrysler Group LLC (Auburn Hills, Michigan) renegotiated their long-term contracts with the United Auto Workers (UAW) union (Detroit) in an effort to help stave off bankruptcy. Obviously, the concessions that the two automakers received were not enough, as both ended up in bankruptcy court. At the same time, Ford Motor Company (NYSE:F) (Dearborn, Michigan) negotiated some minor concessions with the union to stay competitive; however, the automaker returned to the bargaining table several weeks ago in an effort to make additional changes to the contract that would level the playing field for the last of Detroit's "Big Three."

It was announced Tuesday that the UAW and Ford had reached a tentative agreement on a new contract, pending a vote of approval from Ford's 41,000 union workers. The deal goes further than the changes agreed to in March and will help Ford remain competitive in this down automotive market place: pay will be frozen for new workers; the union is banned from striking until 2015; and some of the trade skill classifications within the plants will be combined, so employees can perform more tasks.

In March, Ford received approval from workers to eliminate cost-of-living pay increases and performance bonuses, and got rid of the costly, inefficient and nonsensical jobs bank program that continued to pay laid off workers almost all of their pay and benefits. The concessions awarded in March, combined with the contract if it is approved at the plant level, will move Ford into line with the UAW contracts at GM and Chrysler.

While the approval of the contract is by no means guaranteed, Ford did give a little to the workers as part of the new arrangement. Ford will grant a $1,000 bonus per worker based on quality goals, and has promised additional work for some plants. Exactly which plants will be affected and what they will be producing has yet to be stated.

Ford has managed to remain somewhat aloof during the recent troubles faced by GM and Chrysler. Through either good planning or sheer luck, Ford managed to arrange for $23 billion to $24 billion in loans and lines of credit in late 2006 and early 2007, which allowed the automaker to remain in business during the worst of the recession without government help. Ford even managed to show a $2.3 billion profit during the second quarter of 2009, thanks to $10.1 billion in debt reductions that cut interest rates.

GM and Chrysler have been in the news this year with their bankruptcies, layoffs, proposed plant closings, and brand and model changes. But Ford has stayed out of the limelight, doing business quietly and, essentially, staying out of trouble. During a time that, thanks to the lack of sales, automakers are taking a long, hard look at what models they can do without, Ford has remained mostly quiet, making little or no changes.

Ford has managed to keep its plants open and the majority of workers on the job throughout these rough times. The company certainly has not been spending capital on expanding in North America and was forced, like other automakers, to extend routine summer maintenance shutdowns due to a lack of sales, but Ford has managed to move in the right direction.

Less than three years ago, Ford was the automaker that looked the weakest and possibly the one that could be facing bankruptcy. The company was heavily in debt, vehicle sales were slowing and, just like GM and Chrysler, Ford had relied on sales of their pickups and SUVs to increase profits, something that did not happen as gas prices began to rise.

Now, Ford finds itself in the best position of the Big Three and is poised for a bright future. As long as Ford's executives continue to make the right moves for the company, it will survive the recession and the down automotive market in good shape, ready to tackle the challenges of the next few years. For the first time in a long time, Ford finds itself No. 1 among the American automakers in all aspects of the business, and the company can look forward to not only surviving the recession and sales slump, but to a fast recovery as sales begin to recover.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.