Is Ford Facing a Major Strike?

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It's still too soon to know for sure how it'll end, but this has to be a worrisome trend for Ford (NYSE: F  ) : Through Thursday, 54.6% of workers who have voted have said "no" to the company's proposed new agreement with the United Auto Workers.

A rejection is still far from a foregone conclusion -- only about 20% of workers had voted through Thursday afternoon, when that tally was reported. But with some of Ford's UAW locals already beginning strike preparations, the chances of an unhappy outcome seem to be rising.

Today's forecast: decidedly mixed
The latest factory to reject the contract was Ford's Chicago Assembly Plant, where 76.7% of workers voted "no" on Thursday. UAW leaders at the plant, which makes the Explorer and Taurus, issued strike-preparation instructions after the vote -- a formality, said leaders, but a grim one.

Meanwhile, other results demonstrated the extremes of feelings among union members. Members at a Ford parts plant in Sterling Heights, Mich., voted to approve the contract by a 3-1 margin, and late reports suggested that three more plants had voted "yes" by Thursday evening.

Still, negative sentiment is clearly running high among workers, as many observers expected. Given the relatively smooth approval process seen for a less lucrative contract at General Motors (NYSE: GM  ) , is it time for Ford shareholders to be concerned?

Time to worry?
I think the answer is "yes and no." Voting is still far from done, and union leaders have ways of applying pressure to their membership to help get the votes they want. The UAW's leadership wants this contract to pass at least as badly as Ford's management does, and efforts to sell the contract to workers have already shifted into high gear. UAW leaders and Ford executives continue to express optimism, at least in public.

It's also possible, maybe even likely, that workers who vote later will see their votes in a different light. Early voters may have felt free to express their resentment over the lack of a cost-of-living increase provision in the contract, and over perceived slights by management. But later voters, more mindful of looming consequences, may be more inclined to swallow their concerns and vote "yes."

I think they should, because those consequences could be pretty ugly.

What happens if it fails?
In the event of a "no" vote, the UAW's leadership has three choices, according to labor experts:

  • Conduct a revote. The UAW could just start over, making an even greater effort to cajole reluctant workers into voting for the agreement. This could work: Those early voters who cast "no" votes out of anger will have had some time to ponder things from a more sober perspective, and to be lobbied by peers who want the contract to pass.
  • Go back to bargaining. Leaders could go back to Ford and ask for more. This is unlikely to work out well: If pushed, Ford might reluctantly agree to give workers a wage increase if a prolonged strike seems like the only alternative -- but it's a safe bet that the company would then make it a priority to move jobs and plant investments out of the United States, both to keep costs down and to deprive the UAW of leverage next time around. But it's also possible that Ford might not even agree to reopen negotiations at all.
  • Go on strike. Heated talk is one thing, but the reality of a strike is something else entirely. The UAW hasn't conducted a national strike against Ford since 1976, not least because being on strike is a hard job with no pay. With workers already feeling strapped, a major strike is not a prospect many will embrace with the holiday season looming. A strike could also give Ford an opportunity (and motive) to take aggressive action. The company could legally bring in "scab" workers to keep plants running, for instance. And a major effort to move production out of the U.S. would be a near certainty.

Ford CEO Alan Mulally is unlikely to be overly intimidated by the possibility of a strike -- he was effectively running Boeing (NYSE: BA  ) when the company's machinists struck for 24 days in 2005 and took a hard line in negotiations with that union. The goal of a strike, as with the IBEW's strikes against Verizon (NYSE: VZ  ) earlier this year, would be to force Ford back to the bargaining table, and they'd probably succeed -- but again, that's unlikely to work out well for the union over the long term.

The upshot
Long story short, disgruntled workers could end up forcing Ford back to the table and might even manage to get a wage increase out of the deal. But that wage increase would almost certainly come at a great cost for the union as a whole, and for workers' longer-term prospects.

The UAW's leaders badly want this contract to pass. From their perspective, it's a good deal that will keep Ford healthy -- and labor peace in Detroit will help them argue for the unionization of the U.S. factories of foreign automakers like Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) .

That's a big goal for the UAW's current leadership, but first they need to settle this drama. Expect them to exert great pressure in coming days to get this contract approved.

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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 (4) | Recommend This Article (1)

Comments from our Foolish Readers

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 October 15, 2011, at 12:07 PM, caltex1nomad wrote:

    Great ! Ford becomes relevant again, is making a small profit and paying down debt but, the UAW wants to kill the GOOSE again......

  • Report this Comment On October 15, 2011, at 1:25 PM, quiller4 wrote:

    The UAW leadership badly want this contract to pass and it IS passing by a significant margin. By mid-morning on Sat. October 15, the approval margin was slightly more than 57%.

    The author of this article doesn't seem to understand that the angry few are almost always the first voters. Thus there was a brif period where the "no" votes were winning. The percentage of "yes" votes increases everyday and most educated observers expect the approval margin to reach 60%. Your article is misleading and not just a bit inflammatory.

  • Report this Comment On October 16, 2011, at 9:13 PM, sondo1313 wrote:

    Hey, just wonderin' how much longer you want your readers to wait until the Ford contract vote fails. They've already missed a 10% move if they followed your advice.

    Too risky? What's next? Wait for Ford's debt to be upgraded? Wait for Q3 earnings? Wait for their resumption of dividends? Yeah Ford is too risky at a 6 PE until all these things are settled.

    Good advice, a column worth following.

  • Report this Comment On October 17, 2011, at 1:28 PM, TMFMarlowe wrote:

    @sondo1313: I'm sure you're aware that the world looks a lot different here on Monday than it did when I wrote this last Friday morning. Long story short, I think today's a fine time to buy Ford. More on that later this afternoon.

    John Rosevear

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