Now that the UAW contract with Chrysler is all but ratified, the big union gets to sit down with Ford (NYSE: F). In some ways, bargaining with America's second-largest car company may be the toughest negotiation of all. Ford is in worse shape than its peers, and its revenue problems get worse as each month passes.
Ford may be able to afford putting $30 billion into a health-care fund that the union would manage. That would improve the company's earnings in future quarters. But it would also deplete Ford's balance sheet and give it less cash to fund a turnaround of its U.S. operations. Selling off Jaguar or Rover could bring in more capital, but the process to dump the two brands is slow and the current credit environment will not help Ford get a good price.
Ford had hoped that new products would improve its prospects, but its car sales have dropped about 20% in its home market each of the last two months. It is not clear that Ford can ever make a profit if its U.S. sales do not recover from current levels. It needs sharp cuts in its labor costs in addition to a better sales picture.
The UAW can do a great deal of damage to Ford by insisting on modest job cuts. Ford can ill afford a strike now that the other two U.S. car makers have deals and Japanese rivals pick up market share most months. But the union's rank-and-file came close to rejecting the Chrysler contract because it guaranteed too little in terms of jobs and pay in the years ahead.
UAW workers are likely to take the position that it is not their job to keep Ford in business. And that attitude is the most likely one to put Ford's future in harm's way.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
10-26-2007 @ 11:13AM
woody4x4 said...
Ford needs to step up, and drop the union all together. Dare i say that! As a business, you do what you can to say your company. The Union Has to be droped. The savings can then go into product development, market research, and Marketing. It's the only way for Ford to get going anytime soon. I know There are LOTS of ppl who live and breath by the Union. I know the unions, back in the day SAVED america. But there is a time when ya just have to start over. Untill the unions understand that they are killing the american car maker, they need to be droped like a bad habit.
10-26-2007 @ 11:26AM
Gumby said...
Ford the sacrificial lamb ??
10-29-2007 @ 6:25PM
detroit said...
its not there job to keep ford in business? what kind of bs statement is that? they rely on ford staying in business to feed there family.. Im from the detroit area. as a matter of fact i could through a rock to the sterling heights plant from my house. ford is there life and the only thing alot of people know. Generations go through those factorys. I believe they would rather see ford stay up and them still have a job and a future than not back the agreement. because if they dont there not gonna have an income and jobhunting isnt exactly a walk in the park around that area.. trust me on that. guarantee if they didnt back the deal, and ford ended up having to dump the uaw to stay afloat. those same workers would end up working back on the line, starting over, for less money than there pay cut would have been. Its the only thing thats there. Not bad for ford either way good deal or no union would work out fine for them but what do you think the workers would really want?
10-26-2007 @ 8:32PM
Al Faro said...
The union workers only do what they are instructed to do. Management of Ford Motor Company is totally responsible for the situation they are currently in. The company was making billions in the 90's and their lack of vision and planning is what brought them to this point. Letting the car line deteriorate was their decision and theirs alone. The workers should not and will not pay for management's poor performance. Ford is doing well all over the world but for some reason they can not make it in our marketplace. It seems like they want an excuse to limit the union. Their plan will not work.
10-26-2007 @ 11:03PM
detroit said...
the solution is simple, they take a hit and have a job or they take the buy out and go find a new job. either way ford will binefit, they have to. One can only stay negative for so long and ford isnt going anywhere. crystler employees will ratify the agreement because most would rather have the job security. Same will happen with ford. mark it!
also, over time ford will figure out how to survive in our marketplace and it will be back to business as usual overpaid union workers and all.
10-28-2007 @ 7:14PM
mike mccullough said...
I am a member of the UAW, working for Ford, and I am here to tell you people who think we are over paid, and other such beliefs, the attitude is not what you think. The union and Ford need each other. most don't realize, the root problem is our media and press. Toyota and 2 other forgein auto companies have had major cover ups, and recalls, that the press doesn't tell about, at least on the front page. Back to the point though. We want Ford to be successful, and we have and will continue to give consessions, but only if these companies start being responsible, also. Our wages are only 14% of cost per unit. The CEO of Ford makes about 15 thousand dollars an hour 24/7/365. Do you see a problem? The american product line is lacking too, except in SUV, and trucks. These companies put al their eggs in one basket, another problem, iwould think. Last but not least, American mentalities of buying forgein crap. you may as well take our gold out of our reserves and send it all to japan and everywhere else. IT'S THE SAME THING AS WE ARE ALREADY DOING!!