Friday, October 30, 2009 1:41 PM
Ford's tentative turnaround and the CAW
At first glance, it looks as though the leadership at the Canadian Auto Workers is facing reality – painful as it might be for workers.
Of course, we’re only reading the tea leaves here; the CAW and Ford are not negotiating in the press, though CAW president Ken Lewenza did tell the Reuters news agency that Ford is not offering any guarantees on future investment. Joe Hinrichs, Ford’s global manufacturing chief, has reportedly told the CAW that capital investment is mobile and Ford will move it wherever it does the most good for the company.
Here’s hoping Lewenza and rank and file CAW members understand that point – and that they appreciate there is a global recession going on and they understand that Ford Motor, while doing better than its Detroit rivals, is not at all out of the woods in terms of a turnaround to profitability.
Apparently a lot of members of the United Auto Workers just do not. So far in the U.S., six of 10 locals have voted down a cost-cutting labour pact with Ford, one designed to level the playing field with General Motors and Chrysler. The latter two, of course, recently emerged from bankruptcy with new labour deals. Ford wants the same from the UAW.
While U.S. voting proceeds, Hinrichs and Lewenza are trying to iron out a new deal for Ford in Canada. Ford, reports say, has told the CAW that labour costs must come down or future Ford investments will go where Ford gets “the biggest bang for its buck,” Lewenza told Reuters.
In a nutshell, that means Ford wants to cut about $19 an hour from labour costs – the same cost-saving deal the union gave Chrysler and GM last spring.
The CAW says it’s willing to go along with that, as long as Ford agrees to maintain its current North American manufacturing presence in Canada (13 per cent of the total).
“It’s not likely that we’re going to get a 13 per cent footprint at this point in time,” Lewenza told Reuters. “In fact he (Hinrichs) made it clear that there are no such guarantees in the automotive industry today.”
No worker, no union, wants to go backwards, to make concessions in wages, benefits. That’s a given. So it’s clearly painful for the CAW and the UAW back down. Some workers just won’t, and they’ll vote against any concessionary pact.
But it’s a mistake to think Ford can survive and thrive when its costs are considerably higher than its rivals. So for the time being, the unions need to agree to concessions, or face the very real possibility of Ford faltering. Sure, the turnaround effort is looking good, but despite positive signs, Ford is not a completely healthy and very rich car company.
Yes, yes, some analysts believe Ford could report break-even results for its core North American operations or even an overall profit when it releases third-quarter earnings Nov. 2. That’s good news. So are the recent Consumer Reports findings for reliability. CR says Ford now has world-class quality.
It is also true that according to DesRosiers Automotive Consultants, Ford Canada has picked up nearly three points of market share and sales are up nearly five per cent this year. In the U.S., according to CNW Marketing Research, Ford gained more than five percentage points of retail market share in the third quarter – while GM and Chrysler lost ground.
Ford has streamlined its product development, consolidated its far-flung global divisions, improved quality, cut costs and simplified its model lineup. Ford has also successfully touted the fact that it is the sole Detroit brand not to take a government bailout and not to file for bankruptcy.
Ford’s new models are strong and are selling at decent prices, with less discounting than in the past. Stronger pricing will help Ford’s wholly owned financing arm, Ford Motor Credit on both the leasing and financing side of the business.
In fact, reports indicate that U.S. auto guide Kelly Blue Book will soon have good news for Ford. The Wall Street Journal reports that two Ford vehicles will appear on the list of 2010 model-year vehicles projected to retain the greatest amount of their original retail price after five years of ownership. No Fords were there last year.
These positive developments at Ford might lead some to conclude that Ford’s future is guaranteed. It’s not.
Do not forget that Ford has lost more than $30-billion (U.S.) since 2006 and the company carries a massive debt from having $23.5-billion (U.S.) in 2006 to fund its restructuring.
Ford is racing to reinvent itself as a profitable car company before all the borrowed money runs out. There are many encouraging signs, but for now Ford simply cannot afford to be more generous with its workers than GM and Chrysler.
