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Home»Business»Ford says it is ‘at the limit’ with UAW contract offer
Business

Ford says it is ‘at the limit’ with UAW contract offer

October 13, 2023No Comments7 Mins Read
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DETROIT/WASHINGTON, Oct 12 (Reuters) – A senior Ford executive said Thursday the automaker is “at the limit” of what it can spend on higher wages and benefits for the United Auto Workers, and warned the union’s strike at the company’s most profitable factory could harm workers and slash profits.

“We have been very clear that we are at the limit,” Kumar Galhotra, head of Ford’s combustion vehicle unit, said during a conference call Thursday. “We stretched to get to this point. Going further will hurt our ability to invest in the business.”

Ford is open to reallocating money within its current offer in further bargaining with the union to secure an agreement, Galhotra said. Ford is also working with the UAW on a way to bring workers at joint-venture electric vehicle battery plants into the UAW-Ford agreement, he said.

UAW President Shawn Fain on Wednesday ordered a strike at Ford’s Kentucky Truck factory after Ford negotiators did not present a richer contract proposal.

UAW negotiators turned their attention on Thursday to talks with Chrysler parent Stellantis (STLAM.MI), union President Shawn Fain said, confirming a Reuters report.

“Here’s to hoping talks at Stellantis today are more productive than Ford yesterday,” Fain wrote on social media. Stellantis did not immediately comment.

The standoff between the UAW and Ford could soon affect thousands of workers who are not among the nearly 34,000 Detroit Three workers Fain has ordered to walk off the job since Sept. 15.

About 4,600 Ford workers could be idled because their jobs depend on production of Super Duty pickups and large Lincoln and Ford SUVs at Kentucky Truck, said Ford manufacturing vice president Bryce Currie.

Already, 13,000 workers at Ford suppliers have been furloughed because of earlier UAW walkouts at two Ford assembly plants, Ford supply chain chief Liz Door said. The shutdown of Kentucky Truck, Ford’s largest factory, could push a fragile supply chain “toward collapse,” she said.

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Fain and other UAW officials have countered that Ford, General Motors and Stellantis can afford to increase pay for UAW workers beyond the 20% to 23% they have offered, end lower wage tiers for lower seniority and temporary workers, and restore defined benefit pensions lost in 2007 if they rein in share buybacks and cut excessive executive pay.

SHARP ESCALATION

The walkout at Kentucky Truck was a sharp escalation in the UAW’s slow-building campaign of strikes, and sent a warning to Stellantis and General Motors (GM.N), whose wage and benefits offers fall short of Ford’s, based on summaries the automakers and the UAW have released.

Fain has scheduled a video address for Friday at 10 a.m. EDT (1400 GMT). In past weeks, Fain has used Friday addresses to order additional walkouts, or announce progress in bargaining.

Fain has yet to tip his hand as to what actions he will take Friday, if any.

Some analysts saw Fain’s decision to shut down Ford’s Kentucky Truck plant, which builds Super Duty pickups and Lincoln Navigator SUVs, as a sign that the endgame could be starting in the nearly month-long round of coordinated walkouts at the Detroit Three.

“Pressure was always needed to force a deal,” Evercore ISI analyst Chris McNally wrote in a note on Thursday.

White House press secretary Karine Jean-Pierre said the administration was closely monitoring the economic impact of the widening strike and still hoped both sides will reach a “win-win agreement.”

Last Friday, Fain said if needed, the UAW would strike the GM assembly plant in Arlington, Texas, that builds Cadillac Escalade, Chevy Suburban and other large, high-priced SUVs. GM’s Flint, Michigan, heavy-duty truck assembly plant is another potential strike target.

High-profit targets at Stellantis include the automaker’s Ram pickup truck factories in Sterling Heights and Warren, Michigan, as well as two Jeep SUV factories in Detroit.

“This puts everybody on notice,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “If they haven’t brought anything new to the table since last week, GM and Stellantis should be worried.”

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Reuters Graphics Reuters Graphics

Analysts at Wells Fargo estimated that Ford will lose about $150 million per week in core profit from the Kentucky plant strike.

Ford officials said on Thursday that cutting a deal that does not allow the company to survive makes no sense and that striking the Kentucky truck plant would also hurt the UAW’s profit-sharing checks.

In a sign of the strike’s expanding impact, Delta Air Lines (DAL.N) said on Thursday it is feeling a pinch from the automotive and entertainment labor strikes. Delta President Glen Hauenstein said the UAW strike has curtailed a “significant” amount of business in Detroit.

Automakers have more than doubled initial wage hike offers, agreed to raise wages along with inflation and improved pay for temporary workers, but the union wants higher wages still, the abolishment of a two-tier wage system and the expansion of unions to battery plants.

The UAW has room to expand its walkouts and increase the pressure on the Detroit Three to offer bigger wage gains, richer retirement packages and more assurances that new electric vehicle battery plants will be unionized.

Even with 8,700 workers at Ford’s Kentucky Truck plant now on strike, less than a quarter of the 150,000 UAW workers at the Detroit Three automakers are now on strike. However, thousands more have been furloughed from jobs at operations that are not on strike because automakers said the walkouts made their work unnecessary.

Ford said on Thursday that it already had 13,000 layoffs at its suppliers and that 4,600 of its own workers could be laid off at other plants.

Ford warned that workers at a dozen other factories could be sent home because of the truck plant walkout. Officials said new layoffs stemming from the Kentucky strike could begin in the coming days.

Its Kentucky truck plant, the company’s most profitable operation, generates $25 billion in annual sales, about a sixth of Ford’s global automotive revenue.

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Fain and other UAW officials called a meeting with Ford at on Wednesday evening and demanded a new offer, which Ford did not have, a Ford official said.

“You just lost Kentucky Truck,” Fain said, according to the Ford official and a union source, speaking on condition of anonymity because the talks are not public.

Ford said the decision was “grossly irresponsible.”

Fain has said his aim is to keep the automakers off-balance by taking targeted action rather than a full strike.

The Detroit automakers will report third-quarter financial results between Oct. 24 and Oct. 31, and the UAW could use what are expected to be robust profits to press their case for a richer contract.

Before Wednesday’s Ford announcement, the union had ordered walkouts at five assembly plants, including two Ford assembly plants, at the three companies and 38 parts depots operated by GM and Stellantis.

Reporting by Joe White in Detroit, Abhirup Roy in San Francisco and David Shepardson in Washington
Additional reporting by Priyamvada C in Bengaluru
Editing by Peter Henderson, Ben Klayman, Nick Zieminski and Matthew Lewis

: .

Acquire Licensing Rights, opens new tab

Joe White is a global automotive correspondent for Reuters, based in Detroit. Joe covers a wide range of auto and transport industry subjects, writes The Auto File, a three-times weekly newsletter about the global auto industry. Joe joined Reuters in January 2015 as the transportation editor leading coverage of planes, trains and automobiles, and later became global automotive editor. Previously, he served as the global automotive editor of the Wall Street Journal, where he oversaw coverage of the auto industry and ran the Detroit bureau. Joe is co-author (with Paul Ingrassia) of Comeback: The Fall and Rise of the American Automobile Industry, and he and Paul shared the Pulitzer Prize for beat reporting in 1993.

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