Ford UAW Contract Goes Down to Defeat; CAW Contract is Ratified

The United Auto Workers (UAW) union has voted down a new concessionary contract with Ford in voting that culminated over the weekend, according to the Detroit News. According to an analysis of the known votes by the newspaper, it was statistically impossible for ratification to happen as of late Sunday (1 November) evening. The final blow came on Friday when three of the automaker's largest locals voted down the new contract by significant margins. At the Dearborn (Michigan) truck plant, 93% of the workers voted down the contract, with 53% against at the Romeo (Michigan) engine plant, and 84% voting no at the Local 862, which represents workers at both the Louisville (Kentucky) and Kentucky Truck plants. Voting was completed yesterday, and the union and Ford are expected to announce the official results today. "I think it's over," said Gary Walkowicz, one of the union dissidents who has led the opposition to ratification. "People are saying 'No more.' We've had enough concessions already. We've given up enough already," he told the Detroit News.

"No" votes were also cast last Thursday at three U.S. Ford facilities: two Chicago plants and the company's Saline (Michigan) components facility. Nearly 80% of UAW Local 588 at the company's Chicago Stamping Plant rejected the deal, while 70% of UAW Local 551 at the nearby Chicago Assembly Plant rejected the deal. A three-quarters majority rejected it at the Saline plant. To date, 11 Locals have rejected the deal rather strongly, with only four locals approving it. A simple majority of the 41,000 UAW-represented workers are required to ratify the vote, but that looks like it will be statistically impossible now. The new contract would have put Ford on an equal footing with General Motors (GM) and Chrysler in terms of labour costs, with both of those companies gaining new contracts during their bankruptcy procedures that significantly reduced their expenditures. The new contract at Ford would have allowed for a no-strike clause like the GM and Chrysler contract, but only towards issues of pay and benefits. It would also have frozen wages for entry-level employees and reduced the number of skilled trades positions. In return, Ford was prepared to commit to additional product at the U.S. plants, safeguarding over 2,000 jobs, and would have paid workers a US$1,000 bonus in the spring. It was the first time in 27 years that the union's rank-and-file membership has voted against a contract that their leadership has approved and recommended, according to Automotive News. There were no plans to return to the bargaining table, according to UAW President Ron Gettelfinger. "We have a democratic process in place. People have a right to express themselves," he said. The union leader blamed the defeat on the words of a few vocal dissidents who spread inaccurate information about the contract to the rank and file, but resigned himself to the defeat. "We recognize there's a lot of misinformation about it out there, but that is what it is."

CAW Approves New Contract

While the American workers at Ford were voting down the latest concessionary contract, the company's Canadian workers ratified theirs in weekend voting, bringing Ford's Canadian labour contract to an exact match with those of GM and Chrysler without having gone through bankruptcy. The ratification came even as Ford steadfastly maintained its insistence that it needs to close one of its two assembly plants: the St. Thomas (Ontario) plant that currently makes the Lincoln Town Car and Ford Crown Victoria is slated to close in September 2011. The new contract freezes wages for the life of the contract, eliminated a week of paid vacation, increases insurance co-payments, and halts cost-of-living adjustments after June. But Ford agreed to keep manufacturing at the company's Oakville (Ontario) plant alive with a new, unspecified global platform after 2012. It also agreed to increasing work at its Windsor (Ontario) engine plant. CAW president Ken Lewenza called the closure of the St. Thomas plant, which will affect over 6,000 people, "devastating for Canada," but that severance benefits had been negotiated that were good. Lewenza stated that Ford had insisted on closing St. Thomas, but that if the CAW had not agreed to the new contract, that the alternatives would have been worse. "They actually talked about disinvesting in Canada if we didn't extend the pattern to them," he said. "Our costs are high, relative to U.S. plants—particularly given the strength of the loonie," he added, referring to the colloquial name for the Canadian dollar.

Outlook and Implications

The rejection of the American contract is really more of a moral blow to Ford than a serious financial blow. The company already has a much more beneficial labour contract than it did just a few months ago, given that the UAW has already agreed to a new contract in April that saves the company significant money. Ford has basically become a victim of its own success: in one breath, the company was trying to convince Wall Street and the consumer public that it is in a strong position, that it has weathered the devastating economic recession well, and that it is worthy of consideration, investment, and favourable financing rates. In the next breath, it has tried to convince its own rank-and-file employees that it is still struggling, that it needs additional concessions, and that it absolutely must have parity with GM and Chrysler if it is to guarantee its successful restructuring. The actual situation is somewhere in the middle. Although Ford is doing relatively better than its competition, the key word there is "relatively." In comparison to its cross-town rivals, Ford is enjoying increasing market share, Consumer Reports accolades for quality, and placement in the top ten best-selling vehicles in the recent cash-for-clunkers lists. The company also has a top-notch new model introduction cadence, dramatically reduced structural costs, and a plan in place to share vehicles globally that truly looks like a winner. In these respects, Ford is doing "better" than its rivals who are still struggling to overcome the stigma of bankruptcy and government bailout.

But Ford is not a "healthy" company just yet, despite what is expected to be another announcement of quarterly profit today, its second in a row now. It has massive debt that comes due in 2013 that it has addressed to some degree, but which will require significant profitability very soon in order to address further. It is facing a market that is still extremely uncertain in terms of where it will go, and every bit of cost reduction helps. "The auto market is still 5 million units short of where it should be," said IHS Global Insight's own Rebecca Lindland. "Ford may be better off than GM and Chrysler, but it is hardly in good financial shape." And in comparison to GM and Chrysler, the company may in fact not be better off from a financial perspective, given that both GM and Chrysler have gone through a cleansing bankruptcy that has significantly restructured their balance sheets to the point where crushing debt has been eliminated and capacity reduced to much more reasonable levels. The goal for all of these companies has been to restructure to be at least at break-even (if not outright profitable) at a 10-million-unit annualised market selling rate, which has happened at GM and Chrysler, and is close to occurring at Ford as well.