Workers at Ford's Kansas City Assembly Plant have threatened to strike on Sunday. Image source: Ford Motor Company
Workers at one of Ford's (F -3.01%) F-150 factories are threatening to strike as soon as this Sunday. And reports on Friday indicate that Ford is taking their threat seriously, making moves to shift production away from the affected plant.
So far, investors seem unconcerned. Ford shares were up about 1.5% in afternoon trading on Friday. But if it goes on for more than a day or two, the strike could be disruptive -- and it's one sign of a larger dispute that is growing quickly between the Detroit automakers and their unionized workers.
Why these Ford workers are preparing to strike
United Auto Workers' members at Ford's Kansas City Assembly Plant say that company officials have dragged their feet in negotiations on a new local contract. They're also upset about a proposed national contract that was voted down by UAW members at Fiat Chrysler this past week.
The Fiat Chrysler agreement was expected to serve as a template for a new national contract between Ford and its hourly workers. But it doesn't get rid of a hated "two-tier" pay systems that provides much lower wages for workers hired after 2007.
Workers want to see that system gone -- or at least a concrete plan for phasing it out over time. But Fiat Chrysler (and its Detroit rivals) say they can't afford to pay the high hourly wage rates that were standard in the years before the economic crisis.
That has workers at all three of the automakers steamed. The UAW's national leadership seems to feel that it needs to fire a warning shot at the industry.
It has been many years since the Detroit automakers faced significant labor unrest. A strike at one of the factories that produces Ford's hot-selling new F-150 pickup would be a strong reminder that the union still has considerable power to make life miserable for the Detroit Three.
Will it happen? Ford thinks it might.
What Ford is doing to prepare
Trade publication Automotive News reported on Friday that Ford has begun making moves to keep F-150 production going in the event that the workers at the Kansas City, Missouri plant strike.
Ford builds the F-150 in two factories, the Kansas City plant and a big facility in Dearborn, Michigan. The Kansas City plant also builds the Ford Transit vans. In August, the factory built an average of 1,467 F-150s and 593 Transits per day, according to Automotive News figures.
The Automotive News reported that Ford has added mandatory overtime shifts at the Dearborn factory, one on Saturday, Oct. 3, and another on Sunday, Oct. 11. Ford has the right to schedule mandatory overtime shifts under its existing agreements with the UAW if certain conditions are met, and the UAW local at Dearborn Truck agreed that those conditions applied in this case.
Ford is also diverting shipments of key parts -- truck frames -- from Kansas City to its Dearborn plant. The frames, produced for Ford by two different suppliers, have been in somewhat short supply as production of the new F-150 has ramped up.
How this is likely to play out
If the UAW really is choosing to make a statement, it's clear why it chose this factory. The F-150 is Ford's most important product, and the company has been coping with tight supplies for months. That's a consequence of the complicated retooling efforts that shut down both factories for weeks as they geared up to build the new-for-2015 model, as well as tight supplies of the frames.
Ford said on Thursday that it had about 100,000 F-150s in inventory as of the end of September. That's a a bit short of the 120,000 it considers to be normal, but it's probably enough to ride out a short disruption at Kansas City without too much trouble.
A longer disruption could become a big deal. But that would be a drastic step for the union. The most likely outcome is a short strike (or no strike), followed by an amicable deal between Ford and the UAW on the acute issues affecting workers at Kansas City.
But make no mistake: The UAW still has a lot of power here. As efforts to agree on a national contract drag on, the labor unrest could quickly escalate into something much more than a headache for Ford and its Detroit rivals.
