Will the UAW Really Strike Ford?

With the current labor contract set to expire in just a few weeks, talks between the Detroit automakers and the United Auto Workers are picking up speed. The Detroit Free Press reported on Monday that the union's talks with General Motors (NYSE: GM  ) in particular have intensified, and an agreement may be in place before the old contract expires.

Past talks have often carried on days or even weeks past the old contract's expiration, sometimes leading to disruptive strikes, but United Auto Workers President Bob King has told his lieutenants that he wants talks with all three Detroit automakers wrapped up before the existing contracts expire on Sept. 14.

For GM and Ford (NYSE: F  ) shareholders who have been cheered by the automakers' newfound cost discipline, these talks deserve close attention. Nothing less than the continued recovery of Detroit is at stake.

Success is the only option. But what is success?
Even though its power has diminished, the UAW still has the capability to make big trouble for the automakers. The union gave up its power to strike against GM and Chrysler as part of the bankruptcy restructurings, but it can still strike Ford -- and it can walk away from negotiations and demand arbitration for disputes against the others.

But even as UAW President Bob King provoked media attention on Monday by saying that a short strike against Ford probably wouldn't be all that harmful in the long run, it's clear that he -- and his leaders, and executives at all three automakers -- will do all they can to avoid a strike or arbitration proceedings.

Why so conciliatory? Simple: These negotiations have to be successful. The momentum of the Detroit automakers depends on it -- as does, quite possibly, the future of the UAW itself.

But what does "successful" mean in this context? GM CEO Dan Akerson has been pretty clear about his definition of success: Rather than giving written-in-stone annual raises, which will undercut the company's focus on keeping fixed costs as low as possible, Akerson is pushing for a bonus or profit-sharing program that is tied to metrics like quality and profitability.

That would mean that workers get more in good times and less in bad -- a challenging level of unpredictability from some workers' perspective, perhaps, but a situation that avoids the need to be giving workers raises when the company is perhaps cutting headcount and programs elsewhere. More to the point, from Akerson's perspective, such a program would align everyone's interests -- workers, like executives, will benefit most when the company is doing well.

One company, one direction
Those interests should be aligned, but often haven't been in the past. Akerson, like counterpart Alan Mulally at Ford a few years ago, has put tremendous thought and effort into the problem of getting all the scattered parts of a massive, sprawling, fief-ridden trainwreck of a company marching in the same direction. As part of this, he has done an impressive job of reaching out to the UAW's leadership and spoken often of regarding the union members as GM's employees, not as a rival.

Perhaps conscious of the difficult PR position the union finds itself in following its special treatment during the bailouts, King has so far responded with mostly conciliatory talk. Despite his remark about striking Ford, when speaking on Monday in Detroit King was at pains to downplay the possibility of a strike or other action, saying that his goal in talks was to keep the Detroit 3 competitive (so as to keep jobs in the U.S.) while allowing workers to share in the companies' current prosperity.

But the union wants a raise, and that could be trouble
But that doesn't mean there aren't differences. King's membership would clearly like a raise -- they haven't had a real raise since 2003, and the annual cost-of-living-adjustments they used to get were phased out in 2009. The union is also concerned with the two-tier pay system created by the last contract, in which new hires get half the salary and benefits of longer-tenured members.

When it was created, that two-tiered system was seen as the future -- a way for the automakers to gradually ratchet down what they paid their workforces to keep U.S. manufacturing globally competitive over time. But King now says that finding more money for those workers is "our highest priority," even as he signals openness to profit-sharing arrangements for those in the higher-paid tier.

My sense is that King gets it -- he understands what the automakers really need, and he's not interested in killing the goose just as the golden eggs have started to return. At the same time, though, he's being pushed by a membership that is frustrated with stagnant wages at a time when GM and Ford are reporting big profits.

King has sought to redirect that ire a bit by making efforts to organize non-union U.S. factories owned by automakers like Toyota (NYSE: TM  ) , Honda (NYSE: HMC  ) , and Nissan (OTC: NSANY). Those efforts continue. But they won't be enough to placate his workers in the absence of a raise -- of some kind.

That's the multi-billion-dollar question: Will the rank and file be satisfied with a contract that plays to the automakers' goals? We'll find out.

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Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 30, 2011, at 3:59 PM, SMOKEN42 wrote:

    THE U.A.W..................THESE GUYS HAD BETTER BE CAREFUL WHAT THEY WISH-FOR !!!!!!!!!!!!!! THE AUTO INDUSTRY MANUFACTURING PROCESS IS " GLOBAL ". BAD BUSINESS CONDITIONS IN ONE MARKET, SIMPLY TRANSFERS PRODUCTION TO ANOTHER...............AND AS FAR AS A "STRIKE" GOES, THEY WOULD HAVE TO BE OUT-OF-THERE-MIND. EVEN USING THAT "WORD" SIMPLY SHOWS THE U.A.W. IS STILL LIVING IN THE PAST. THE DAYS OF "BULLYING" THESE MULTI-NATIONAL COMPANIES IS LONG-GONE !!!!!!!!!!!!!!!!!!

  • Report this Comment On August 30, 2011, at 5:12 PM, esbita wrote:

    What leverage does the UAW think they have here? Ford's choices are basically to bend over, or endure a long strike, or shut out the union and start over with non-union labor.

    I left Michigan in order to find a living wage. Many of my classmates remain behind and would *love* a steady job with health benefits. Retirement healthcare takes a decided back seat when you are worried about making next month's rent or even this wee'ks grocery run.

    The UAW is running out of political capital and public sympathy. If they push for anything beyond a modest cost of living raise then few will feel any sympathy for their members. In fact, the public might cheer on the strike in order to have a shot at the striking employees' jobs! Sadly, by that point the jobs would no longer stay in country.

  • Report this Comment On August 30, 2011, at 5:33 PM, prginww wrote:

    All these dumb comments you people must not work on the line. Lets just give Alan Mulally another 40 million bonus and screw the people that work for there money not behind a desk.

  • Report this Comment On August 30, 2011, at 6:32 PM, AmericanFirst wrote:

    The UAW needs to remmember those evil executives are the ones that create the jobs for the UAW.

    If a UAW member is unhappy with their job, they should quit and find a job they like. That's what happens in the real world!!

  • Report this Comment On August 30, 2011, at 7:17 PM, prginww wrote:

    you people need to understand. the unions are what made the middle class. the middle class is fighting each other. while the ceo of these co. are loving it. nobody is worth 50 mill. no matter what you do for a co. but we all are worth more than 15 dollars a hour. in 1987 15 dollars was great. but gas was under a dollars and so was a gallon of milk. so do not hate somebody because they are doing better for themselfs.

  • Report this Comment On August 31, 2011, at 9:33 AM, esbita wrote:

    realtechwiz:

    Some news for you- plenty of people who actually bothered to study in high school and then go to college or trade school are only making in the $15/hr range right now- many without benefits. We already have precedent of automotive company bailouts. If the UAW pushes one more auto company over the edge then the taxpayer (many other folks who also make only $15/hr or so) ends up as the backstop for the compensation increases the UAW negotiates.

    Go for a cost of living increase; no one will fault that. Negotiate for greater input in manufacturing practices and management- people will applaud the move. Realize, though, that many other workers around you have their compensation partially tied to performance.

    Or move south and work in the Subaru or Toyota or BMW plants. Move if necessary to find a better deal or to switch fields. Many folks moved to Michigan or Ohio several generations back to do just that.

    The UAW needs to join the 21st century and justify their value to the market...just like everyone else.

  • Report this Comment On August 31, 2011, at 4:06 PM, bullrdr6 wrote:

    Let the UAW strike and I hope Ford replaces them all with non-union workers.

    The UAW as a whole is only looking for the money. Just like UAW trying to get into Toyota, Honda and other transplants. They've lost so many UAW members in the last 15 years they have to try and make up their money somewhere.

    Open up all the jobs to the fair market and let the most qualified get them and fight to keep their jobs based on performance and attendance. Not based on seniourity or other UAW bs.

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