When auto workers went on strike in September, executives at major American automakers warned that union demands could significantly undermine their ability to compete in a rapidly evolving industry. Ford Motor’s CEO said the company may have to abandon its investment in electric vehicles.
The future doesn’t look so bleak now that Ford and the United Automobile Workers union have reached a tentative agreement that will likely serve as a model for agreements the union eventually reaches with General Motors and Stellantis, the maker of Ram, Jeep and Chrysler.
Ford’s cost will increase under the terms of the new contract, which includes a 25 percent raise over four and a half years, enhanced retirement benefits and other provisions. But analysts said those increases should be manageable. What will be most important to the company’s prospects, they said, is how innovative and efficient the company is in designing and producing cars and technology that can compete with the offerings of Tesla, which dominates the electric vehicle segment. fastest growing automotive industry.
“They haven’t agreed to anything that would kill their competitiveness,” said Joshua Murray, an associate professor at Vanderbilt University and author of a book which examined how American automakers lost ground to their Japanese and European rivals. He said the deal could even help Ford, in part because the four-year contract ensures there will be no labor disputes during an intense phase of the transition to electric vehicles.
“They won’t be involved in labor disputes as they deal with” technological change, Murray said.
The approximately 17,000 Ford workers who had been on strike, out of a total of 57,000 UAW employees at the company, are expected to begin returning to factories soon. At UAW Local 900 in Wayne, Michigan, in front of a Ford plant that was one of the first three factories to be attacked by the UAW, workers were getting rid of signs, firewood and bottled water that had been stored for workers. pickets.
“This is the best contract I’ve seen in my 30 years with Ford,” said Robert Carter, 49, who works with engineers to design workstations on the assembly line. He said younger workers who had been earning well below the maximum wage of $32 an hour would see the biggest impact under the new contract; His salary would rise to more than $40 an hour over the next four and a half years.
“For some people, their salary will almost double,” he said. “How can you say that’s not huge?”
Despite the big pay increases, Wall Street seemed confident that Ford could handle the financial burden. The automaker’s shares were little changed Thursday afternoon, an indication that investors view the labor pact as in line with expectations. Barclays analysts estimated that the annual cost of the pay increases, improved retirement benefits and other measures would be between $1 billion and $2 billion annually at the end of the four-year contract, or about 1 percent of the sales.
Some analysts were more pessimistic, saying the cost to Ford could put it at a significant disadvantage, perhaps leading the company to move more production to Mexico.
“It adds a constraint in a very competitive market,” said Jonathan Smoke, chief economist at Cox Automotive. “It’s definitely a compromise that I think will limit Ford’s performance in the future or force them to consider alternatives.”
During the contentious negotiations, Ford complained that a big raise for workers would leave it even further behind Tesla in the electric vehicle market. Sales of Ford’s two main battery-powered models, the F-150 Lightning pickup truck and the Mustang Mach-E sport utility vehicle, have been disappointing this year, and the company recently scaled back plans to increase production of the Lightning. .
But Tesla and other automakers such as Toyota, Hyundai, Nissan and Honda, whose U.S. factories do not have unions, could now face pressure to raise wages, eroding any cost advantages they may have had.
The UAW has declared its intention to try to organize those factories. The wage deal with Ford, by far the biggest wage boost the union has achieved in decades, will likely serve as a powerful advertisement for collective bargaining.
“Elon Musk better be looking at this,” said Madeline Janis, executive director of Jobs to Move America, an advocacy group that has close ties to unions. “Hyundai and Toyota better look at this. This is a new era in which workers are rising up.
Tesla, the company Musk runs, and other automakers such as BMW, Mercedes-Benz and Volkswagen that do not have unionized workers in the United States, could decide to give precautionary raises to keep labor organizers at bay.
“One strategy to deter union organizing is to raise wages,” said Rebecca Kolins Givan, associate professor of labor studies and labor relations at Rutgers University.
The decisive factor in the electric vehicle market will be the ability of Ford, GM and Stellantis to produce innovative products, Givan and others said. That’s the responsibility of management, not assembly line workers.
“It is clear that these companies have work to do in the electric vehicle market,” Ms. Givan said. “There is nothing in this contract that creates restrictions.”
In addition to the 25 percent wage increase, the contract gives Ford hourly workers cost-of-living wage adjustments, significant gains in pension and job security, and the right to strike over plant closings. The union had initially asked for a 40 percent pay increase.
Ford has not yet set dates to restart plants paralyzed by the strike. The company previously said it could take up to four weeks to reach full production. Ford also needs about 600 suppliers to resume production and deliver parts.
“Getting a plant back on track is much more difficult than tearing it down,” Bryce Currie, Ford’s vice president of manufacturing in the Americas, said this month.
Workers at the Wayne plant, which makes the Ranger pickup truck and the Bronco sport utility vehicle, had not been ordered to return to work Thursday, but expected to be back on the assembly line next week.
Walter Robinson, 57, has worked at the Wayne plant for 34 years and expects to retire at the end of the new contract. But he said three of his children work for Ford and would see a big benefit from the new terms.
“My daughter has only been here two years and it would take her years to get the higher salary,” he said. “This will help her immensely. This will improve her lives.”
