Ford CEO Not SO Big on Unions Anymore

Ford CEO Jim Farley always thought that his company and the United Auto Workers UAW) rubbed along pretty well together. That is until this past summer and fall when the UAW’s pugnacious new president Shawn Fain – after scoring a massive contract victory at UPS – turned his sights on Detroit’s D-3 (Ford, Stellantis, General Motors) automakers as his next targets. All those contracts were due for negotiation at the same time.

Fain wanted to try a new union strike strategy – he’d hit all three at once. The traditional UAW template had always been break one manufacturer after the other in the hopes they’d fold before you got to the last one. In this new, improved strategy, Fain mapped out specific plants of each to strike on a rotating basis until the automakers cried uncle.

Ford was the first to capitulate.

…Pugnacious union president Shawn Fain has himself a victory to crow about this morning.

I mean, like, the numbers – DAY-YUM.

The United Auto Workers (UAW) union reached a tentative labor deal on Wednesday with Ford Motor (F.N), the first of Detroit’s Big Three car manufacturers to negotiate a settlement to strikes joined by 45,000 workers since mid-September.

The proposed accord, which UAW’s leadership must still approve, provides a 25% wage hike over the 4-1/2-year contract, starting with an initial increase of 11%.

The Ford deal, which could help create a template for settlements of parallel UAW strikes against General Motors (GM.N) and Chrysler parent Stellantis (STLAM.MI), would amount to total pay hikes of more than 33% when compounding and cost-of-living mechanisms are factored in, the UAW said

Fain might not realize the bad taste his tactics left in corporate mouths. “So what? Eff ’em!” would be Fain’s retort in any instance, but it might not hurt to lend an ear and take note anyway.

Chickens always come home to roost…@WelbornBeege @penguinponders

Ford CEO says company will rethink where it builds vehicles after last year’s autoworkers strike https://t.co/jMuXoC7W1O

— John Clark Doe (@PrestonCheek2) February 15, 2024

This is what is known as “an ominous signal” resulting from a “don’t bite the hand that feeds you” move by the union at the start of hostilities.

Last fall’s contentious United Auto Workers’ strike changed Ford’s relationship with the union to the point where it will “think carefully” about where it builds future vehicles, Ford’s top executive said Thursday.

CEO Jim Farley told the Wolfe Research Global Auto Conference in New York that the company always took pride in its relationship with the UAW, having avoided strikes since the 1970s.

But last year, Ford’s highly profitable factory in Louisville, Kentucky, was the first truck plant that the UAW shut down with a strike.

Farley said as the company looks at the transition from internal combustion to electric vehicles, “we have to think carefully about our (manufacturing) footprint.”

Farley said it had always cost the company more to build their big pickups in the States, but that was okay with them.

…Ford, Farley said, decided to build all of its highly profitable big pickup trucks in the U.S., and by far has the most union members — 57,000 — of any Detroit automaker. This came at a higher cost than competitors, who went through bankruptcy and built truck plants in Mexico, he said. But Ford thought it was the “right kind of cost,” Farley said.

Ford has thousands more union members than any of the other manufacturers and has the highest labor costs. Those got even more expensive after the new contract was agreed upon. It’s especially challenging as EVs have languished in sales even as cheap Chinese competition is heating up in the sector. Ford has to remain competitive.

…But the new UAW contract will add $900 to the cost of each car Ford makes — more than the $575-a-car cost GM sees from the labor deal — and that will have an impact on how Ford expands its manufacturing footprint to accommodate growth in EVs and traditional internal-combustion-engine vehicles.

“As we look at this EV transition and ICE lasting longer and our truck business being more profitable, you know, we have to think carefully about our footprint,” Farley said, adding that the UAW strike “was an extremely difficult moment for the company. Ford had always prided itself on not having a strike since the ’70s.”

And Ford has whopping manufacturing costs.

…High manufacturing costs are among the reasons why Ford has a $7 billion annual cost disadvantage to competitors, Farley has said.

He told the conference that Ford is making progress on cutting those costs with cultural and structural changes at the company.

It expects to take out $2 billion worth of costs this year, and Farley said he thinks cuts in manufacturing costs will “fully offset” the cost of the UAW contract. Ford has said the contract would add $900 to the cost of a vehicle by the time it reaches full effect.

So moving manufacturing elsewhere or closing things down completely are real possibilities now, and I don’t see Farley feeling nostalgic for the good old days before this strike. 

Fain, when he finally issued a comment, was his usual vivacious and engaging self.

Just kidding. He was as “eff ’em” belligerent as ever.

The head of the United Auto Workers hit back Thursday at comments from Ford Motor Co.’s CEO that the automaker needs to “think carefully” about where it builds future vehicles, saying the automaker “doesn’t need to move factories to find the cheapest labor on earth.”

…In a statement responding to Farley’s comments, UAW President Shawn Fain said: “This contract was a major victory for working families across this country, and if Ford is upset about that, that tells you a lot about the leadership of this company. Maybe Ford doesn’t need to move factories to find the cheapest labor on earth, maybe it needs to recommit to American workers and find a CEO who’s interested in the future of this country’s auto industry.”We’re moving forward raising the standards across the industry from the Big Three to the non-union companies. We encourage Ford to stay focused on building the best auto industry in the world, and not on an endless race to the bottom.”

Yeah, that tone should help to soothe those ruffled feathers.

Fain might find out Farley is built for business Ford tough, and then what?

Let’s see how long before the layoffs and moving vans start if that turns out to be true.