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Ford Won't Restart Its Factories in April After All

By John Rosevear - Mar 31, 2020 at 10:21AM

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The UAW had some big and understandable concerns.

Ford Motor Company (F -0.46%) said that it is postponing its plan to restart production at a few of its factories in the U.S. and Mexico.

Ford had been hoping to restart production of its Fusion and MKZ sedans in Mexico on April 6, and of several of its truck and van models in the United States on April 14. But that plan is on hold, said Ford's North America chief, Kumar Galhotra, now that the automaker has consulted with United Auto Workers (UAW) union leaders.

What Ford and the UAW said

"We are working very closely with union leaders -- especially at the UAW -- to develop additional health and safety procedures aimed at helping keep our workforce safe and healthy," Galhotra said in a statement.

F-150 pickups on the production line at Ford's Dearborn Truck Plant in Dearborn, Michigan.

Ford had planned to restart production of pickups and commercial vans on April 14, but that plan is on hold for now. Image source: Ford Motor Company.

UAW president Rory Gamble hailed the decision, saying it was the right call under the circumstances. He said the union will work with Ford to ensure that employees are able to stay safe from COVID-19 when production restarts. 

Ford shut down its factories in North America in mid-March, after the UAW expressed concerns about the risks to workers from the highly contagious COVID-19. The company has made a series of moves to conserve cash since, but has so far avoided cutting jobs.

Ford's ventilator effort will continue

Ford said that its plan to begin producing hospital ventilators at a parts plant in Rawsonville, Michigan, will go ahead despite the decision to postpone the restart of vehicle manufacturing. About 500 UAW-represented Ford workers, all paid volunteers, will be working on that effort when production begins the week of April 20. 

Ford has pledged to make 50,000 ventilators by July 4. 

What it means for Ford investors

On the one hand, this isn't good news. With its factories in North America and elsewhere closed, Ford's revenue stream has been cut drastically. Ford, like most automakers, books revenue when vehicles are shipped to dealers: If it isn't shipping, it isn't earning revenue. Put another way, it's burning a lot of cash. Restarting a few factories would have at least slowed that cash burn. 

On the other hand, if we read between the lines of Ford's statement, it seems pretty clear that the UAW wasn't happy about Ford's plan to restart production. Auto investors sometimes forget that labor peace is a valuable commodity, because the alternatives -- strikes, production disruptions, public wars of words -- are costly. 

Obviously health concerns played a big role in this call. But it was also prudent for Ford to avoid picking a fight with the UAW over this, whatever its motivations. 

John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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