Ford and UAW Agree on Tentative Contract
By Chris Haak
11.03.2007
Early this morning, Ford and the UAW announced that they had come to a tentative agreement on a new four year collective bargaining agreement. Of course, the contract is not finalized unless a majority of Ford’s 54,000 active hourly UAW employees ratify the agreement. The breakthrough came after nearly two days of around-the-clock negotiations between the parties.
Negotiations between Ford and the UAW began in earnest following the ratification of similar deals with both GM and Chrysler LLC over the past few weeks. Also, unlike the negotiations between the UAW and Chrysler and GM, there was no strike before the parties came to agreement, and in fact, there was not even a public strike threat. Two main factors probably made a strike unnecessary in Ford’s situation: the UAW and Ford enjoy a far more cooperative relationship than the UAW does with GM or Chrysler LLC, and Ford is in a far more precarious financial situation than either Chrysler or GM – and the UAW understands that very clearly.
Neither the UAW or Ford has formally released any details of the agreement, but sources close to the negotiations have confirmed a few key points. Like the agreements with GM and Chrysler, the agreement allows Ford to shed its retiree healthcare obligation ($22 billion in Ford’s case) in return for the creation of a voluntary employee benefits association (VEBA). Other main features of the tentative contract included a two-tier wage structure and more flexible work rules, as well as future product commitments from Ford beyond the lifecycle of current models. The future product commitments, if sources are correct, would be similar to what GM gave to the UAW when the UAW called its strike – and what Chrysler was unwilling to give to the UAW. Because the lack of product commitments on Chrysler’s part to the union became a huge issue during the very close ratification vote – and GM’s deal with the commitments was a much easier sell, I’m guessing that Ford’s ratification vote will likely happen relatively smoothly.
The next step is for the UAW to call local union leaders to Detroit early next week to review the details of the tentative contract with them. Assuming that they are also in favor of it, the contract would then be put forth to the membership for a ratification vote shortly afterward.
Assuming that the contract will be approved, its ratification will mark a significant change in the auto industry landscape in the United States. As an enthusiast, I sincerely hope that the cost savings will be applied to developing world-beating future products – products which will sell themselves – and not just fattening the pockets of investors, management, and employees. Product improvements will eventually alter consumers’ perceptions, and sales increases should eventually follow.
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