Ford (NYSE: F) and General Motors (NYSE: GM) have started telling the UAW that they are willing to move much of their production outside the U.S. if they cannot get very large concessions on employee costs.
According to The Observer in the UK, if negotiations do not go well, "Ford and GM negotiators have said the companies will have no choice but to move their North American operations to countries in Latin America and Asia."
Both car companies have been trying to set up a fund, run by the UAW, to handle most of the pension and health benefits for the UAW. This would have to be funded with as much as $60 billion from the two companies, but would take the liabilities for these costs off of their balance sheets.
But, the UAW may want a level of funding for this pool that is greater than the car companies are willing to give. Or, the UAW may want to fight for a higher number of jobs in the U.S. than GM and Ford feel they can handle. With falling vehicles sales and high costs, getting their North American operations profitable may be impossible no matter what the union gives.
All the UAW has to push back with is a strike. And, strike it may. If the UAW gives up what the car companies want in this round of negotiations, the union will cease to exist as the bargaining force that it has been for decades. The union may decide that it is better to risk dying while defending its workers that to be overrun without a struggle.
Douglas A. McIntyre is a partner at 24/7 Wall St.










Reader Comments (Page 1 of 2)
8-26-2007 @ 1:21PM
Michael Schneider said...
The threat of moving production abroad has more force since the auto companies are looking more and more to growth from abroad to help make up for sliding sales in the US. However, it is also an expected negotiation tactic which has become more effective in recent years.
Automakers are in some trouble as they face lower sales of SUV, a credit cruch and a consumer pullback. UAW is not in a good position in this environment.
Some silver linings for the automakers include the strengthening of the yen which should provide a small bit of help to US car makers esp. in sales in Asia. Also GM's Volt (see item in Trends section- left side halway down page- at http://www.Barrelomoney.com) could be a game-changer in the market down the road.
8-26-2007 @ 6:21PM
Carlton Wiens said...
Lee Iacocca told Congress in 1979 that he had jobs at $17 an hour, not $28 an hour. The UAW has been on notice for nearly 30 years. They are greedy and don't seem to see the light.
8-26-2007 @ 8:48PM
JOE LABELLA said...
THESE COMPANIES HAVE BEEN FIGHTING FOR SURVIAL FOR YEARS! THE UNIONS ARE IMMATURE AND IRRESONPSIBLE. IF THEY DO NOT WAKE UP ALL THEY WILL ACCOMPLISH IS PUTTING MANY MANY FAMILIES ON UNEMPLOYMENT AND WELFARE.
FORD CO IS THE PERFECT EXAMPLE, HISTORICALLY THEY HAVE STRIVED TO PUT FOOD ON THE TABLE AND ROOFS OVER THE HEADS OF AMERICAN FAMILIES. WHAT IS THEIR REWARD, BRINK OF BEING OUT OF BUSINESS WHILE TOYOTA AND HONDA TAKE THE AMERICAN DOLLAR.
AMERICAN CAR COMPANIES HAVE COME A LONG WAY WITH QUALITY AND "BANG FOR THE BUCK", WE AS AMERICANS HAVE NOT SHOWN OUR LOYALTY.
AS ALL THE WWII VETS DIE OFF THE LOYALTY HAS SHIFTED FROM AMERICA TO JAPAN.
I AM NOT 80 YEARS OLD NOR DO I SAY WE SHOULD BUY AMERICAN ONLY BECAUSE OF AMERICAN HOWEVER MANY AMERICAN CAR COMPANIES HAVE MET THE CALL AND HAVE GREATLY INCREASED THE QUALITY OF THEIR PRODUCTS - IT IS A MATTER OF TIME BEFORE AMERICANS BUY AMERICAN OR IS IT TOO LATE?
8-26-2007 @ 9:04PM
Gumby said...
We have rust bowl, bible belt, now we will have jalopy belt in Michigan
8-26-2007 @ 9:05PM
Gumby said...
UAW can always buy GM and Ford from shareholders. UAW is rich enough to afford this . We are not going to sell to UAW for cheap. We rather close down and move overseas than to give to UAW. GM is worth 80 billion and Ford is worth 55 billon . Deal? UAW will see why it is so hard to make money even with the executives out of office and the union bosses in charge.... Really, UAW doesnt have to make money since there will be no more shareholders to pay out to or suck up to anymore. Why dont you take the deal instead of the cowardly strikes...
8-26-2007 @ 9:06PM
Gumby said...
UAW can buy us out and search for executives that UAW likes . I dont mind having UAW keeping their jobs here in U S of A. I am willing to give UAW a chance to prove that they can do it without the fat cats. Really, I always think that GM and Ford management is the best they can get. I guess UAW knows more about the business than I do so why dont UAW just buy shareholders out and take over the harnesses.
8-27-2007 @ 1:44AM
LARRY said...
TO ALL YOU KNOW IT ALL ON THE UAW. IMMATURE ? IRRESPONIBILE ? WHY DON YOU CALL THE SALVATION ARMY AND SK THEN IF WE'RE THAT? eACH YEAR AT THANKSGING TIM THE UAW PUTS ON A FUND RAISING DRIVE AND RAISE ALOT MONEY FOR THEM. WE RAISED THROUGH FUND RAISING EFERTS ALOT OF MONEY FOR THOSE POOR PEOPLE THAT LOST SO MUCH IN KATRINA. WE'VE GOT PROGRAMS SET UP FOR ACOHOLICS, FAMILY PROABLEMS. EVERYTIME THERES A DISASTER THERES REPRESENTIVE AT THE PLANT GATE WITH THE BUCKITS TAKING UP OUR HARD EARN MONEY FOR THEM PEOPLE IN NEED. AND WE'RE NOT LAZY !! WE EARN EVERY BIT OF OUR MONEY !!
8-27-2007 @ 9:42AM
jpdr1100 said...
Detroit auto companies have strived to put food on the tables and roofs over the heads of Americans?? Since when?
I thought their goal was to provide a product the public wanted to buy so they could return a profit to their shareholders. Isn't that the goal of any company? The food and roofs are simply byproducts.
Was Ford trying to feed Americans when it located production if its new high-volume midsized sedan in Mexico (built on a Mazda platform designed in Japan)? Is Chrysler trying to house Americans when it sources nearly half its product from outside the US, and is racing to be the first to import a communist Chinese-made sub-compact?
Is GM looking out for Americans first when its largest selling sedan is imported into the US?
8-27-2007 @ 3:13PM
Giveitarest said...
I'm a Ford man through and through and will be disappointed when the unions destroy Ford and they close their doors. Unions had a time and a place, both are now gone and the demise of the American auto manufacturer is coming bacause people think they "deserve" a wage. To say that you're highly skilled and can't be found elsewhere is a farse, look at the non unionized auto workers building vehicles of equal or better quality on a lower wage. Face it, times up, keep going down this road and you'll be on the unemployment line. Destroying the company that employs you destroys you in the end.
8-27-2007 @ 3:46PM
Gumby said...
Do UAW really, really, really, realy need to wait until the deadline of the talks on Sept 14th before acting? Strike?? Why not do it now? I know UAW still want to keep jobs and UAW knows that another strike aint gonna cut it... So get your asses and balls going!! Get your shareholders back and buying GM and Ford stock and lending billions more. UAW, you know exactly what you got to do so quit playing the game... It is silly to squabble over the health issue or whatnots. Forget that and let management and shareholders win this time. UAW, you had won every damn contract talk since 1930. Management just couldnt shut down the plants and leave dealerships fallow of new shiny cars and you UAW always knew that. Management has no choice left but to shut down every friggin plant in Detroit area and that MGM Casino/Hotel owned by Kirk in Detroit as well. You dont know that?? Ok, get it going . I am waiting ....
8-27-2007 @ 7:50PM
Jerry Sombati said...
ah now all cars will be built with cheap labor, clever that the automakers are theatening to move production out of the US, but they forgot one thing, whos going to buy their products now, certainly not any korean or japanese, certainly not a chinese, besides they cant afford a car on their wages as is, and their wont be any american workers left to buy a car, everything will be imported. no here will be employed, how sweet the USA a third class country, or those of you with smirks on your faces, dont think your turn isnt coming as well, your pay will be cut or your job will be outsource. some choice. Bush ecomonics what a wonderful way to spead Capitalism even the communist has learn how to defeat us be like us. clever arent they . they know the greed on the americans will destroys us once and for all, sweet land of liberty they call it
8-27-2007 @ 7:51PM
Jerry Sombati said...
hence the uaw doesnt set the standard wage anymore walmart does, hmm can you buy a car even a toyota with an walmart wage? toyota better get walmart execs, to give raises to it workers or else Toyota ends up like Gm and ford
8-28-2007 @ 1:07AM
travelersquest said...
To those of you who say things like 'quite squabbling over healthcare...': what do you do and do you have healthcare? I am tired of the media and public spouting out about the uaw and its workers when there is little mentioned about workers elsewhere. Immature? many workers in other fields are too, like the principal in Cleveland Ohio who had her secretary use a marker to color in a young man's shaving on his head rather than send him home. Oh yeah, look around before you point your fingers. There are good and bad workers everywhere. And I'd like to see where other jobs list the per hour pay that includes all the benefits figured in, as well as the costs for their retirees added to this and divided by ONLY the active workers numbers. That is how they get the so called $74 per hour, and it still accounts for only 10% of the cost per vehicle. So the 90% goes where????? Most of it goes in someone that is NOT a uaw member's back pocket. As for healthcare, it is average at best. We pay copays, and retirees pay part of their premiums as negotiated by uaw midcontract several years ago. Big industry is greedy, and eventually sending jobs out of the country to cheap labor will catch up with them. Who will be their consumers when everyone is making minimum wages???????
8-28-2007 @ 2:34PM
Bob said...
Ex. Ford Salaried employee. Ford tractor Operations. We were "Sold out to FIAT" I retired, in 1992 Early out. Now known as Case New Holland. When I reired, my payment for me and my wife for Health benefits was $50.00 per month. I gladly paid that as I had a friend that also retired in 1992 and he had no health benefit other than Cobra. His cost exceeded $500.00 per month. By 2002 my Health Benefit payment had risen to $300.00 per month. We made adjustments to our standard of living and survived until I was able to get on Medicare. At that time I still needed Health Benefits for my wife as she isn't of age for Medicare, so we had to stay with the CNH benefits at more than $300.00 per month. One more year and she will also be on medicare and we will be free of the obnoxious cost of health benefits from CNH.
Now, how about some of you UAW people think hard about weather you want the company you work for going bankrupt, or perhaps you and your family could justify paying a portion of your Health Benefits. Think about it, and talk to your fellow employees and your union leaders. Betcha in the long run you will see that if you help your company, you will in the long run help yourseves. They haven't asked you for much help with health benefits, so why not start a new trend and ask how much you can help them for a change.
8-28-2007 @ 4:47PM
gumby said...
If UAW still wants to strike, then the management will have to lay off one half of them that doesnt make money or buld gas guzzlers that drives up the gasoline demand and high prices, anyway. GM and Ford is still big enough to shrink to one half size and make enough money and paying dividends to drive up stock prices back to old highs. Then after that, supernova! GM and Ford will die like old suns.
8-29-2007 @ 5:00PM
JT said...
If Americans are willing to buy foreign autos, the foreign auto mfg. should be charged what the social security tax money would bring in thus having enough $$$ for future Social Security benefits. At least $$ would be in the future funds.
8-31-2007 @ 1:10AM
Steve said...
The second comment got me. Most of the people don't get it.And most won't their to blind to see the truth they've been mislead for years by false statements from Management and slick Lawyers that work for the big three.Just look at Delphi a spin off from GM. Their going through bankruptcy and getting big concession from the workers and upper Management got millions in bounces. GM did the same thing when they told everyone back in the 80's that were closing plants and need to trim down (downsizing) and Management well be cut and acquired controlling interest in Well Fargo and a lot the supervision were worked into positions their and with EDS as another company same thing with Hughes I know for a fact of 12 people that worked on supervision that were moved into position with these company's. And we took pay cuts and benefits hits and what happened Upper management got Millions in bounces again. Only 30% of the car cost is from the worker and his benefits and not the figure GM and Ford want the public to know. 17 % of the cost is for Upper Management and approximately 22% for engineering, designers and fail projects, Car's that didn't go, Cars that go to SEMA as one off and show vehicles not to mention Lawyers staffing and advertising and Nascar's bill that alone is approximately 15 million per team per year. now then let's add in all the new plants they have built overseas and across the southern boarder in the last 25 years.That bill a lone if built here in the USA would have saved thousands of jobs and bought equipment and quality standers up far beyond what the are now (nothing like trying to build a car with 35 year old equipment.But this is another story altogether. You figure it up and very little is on the employee so I think when they move over seas and they pass the responsibility of the retirement off on the the government and everyones taxes go through the roof we'll all lose . I sure hope that no one buys their cars and the retires wise up and stop buying their products we'll just see how big those bounces are then. But sad to say nothing well change people well buy their products Heck look at Japan they built their plants here and have a well paid work force at that. Their not moving to South America or Mexico. but most well read this and think I'm a disgruntle employee But you'd be wrong I just another worker like all of you I'm just informed and have taken the time to get the facts.
8-31-2007 @ 3:06PM
George Lewandowski said...
I find some of the comments extremely funny. Comments liek "who will buy the cars if Americans don't"> Who's kinding whom. We are not the "Top banana" with respect to economic power and purchasing power. Someone like India and CHina are. And there are over two billion people that want what we wanted once, "A better life, a nicer car, a nicer home". If we don't buy the cars that american auto makers make overseas, others will don't kid yourself about that. Make them well and cheaply and the market is yours.
8-31-2007 @ 3:27PM
Gumby said...
I just dont understand why GM and Ford is still advertising pickups on TV . They are gas guzzlers. I never see their advertisements on gas misers. I guess it is pointless to advertise on money losing models that happen to sip gas. Any models that gulp gasoline make money for GM and Ford. It tells us that Mullay of Ford is still clueless. He ought to forget F trucks and tell UAW to go to hell!!
9-01-2007 @ 1:16PM
Gumby said...
UAW doesnt seem to understand that management just knew that if management makes a lot of profit then UAW will want a share of that. So management decide to "lose" money somewhere else so UAW cant touch them . But heck, managment had built up a $100 billion pension coffers for UAW in each GM and Ford. Chrysler had similar smaller one. If you are saying that only 10% of car price goes to labor costs and where the heck 90% went, I ask you why you never asked the management that question in the first place. You , UAW chumps, forgot all about us, shareholders of GM and Ford all along. We are disconnected. Maybe it is the prices of copper, steel, alloys, health costs, utility costs, regulations, maintenances, etc that all of sudden went up and clobber UAW! UAW probably assumed that copper will stay stuck at $1 a pound but copper went up to $3.50 a pound and our largest copper miner Phelps Dodge got bought by antoher large copper miner for $26 billions . Phelps Dodge less than one tenth the size of GM is almost twice as valuable as the whole GM now. Something is very wrong with GM all of them including management, UAW you yes you!! You are not paying attention and that is how you cant survive. You cant just barhop all around and leave all the cares to sharehlders!!! Shareholders has billions to invest and they dont think UAW or GM management is worthy of their hard earned investment money except those sucky mutual fund managers who have no choice but to invest in runny nose dripping GM stock and Ford as well. Aha, I forgot about gasoline prices that had gone up as you know . That really hit you UAW in the face like with a two by four stick. You are not prepared at all. You probably were never Boy Scouts as the famous slogan says "Be prepared"