Concerns that Ford (NYSE: F) workers might reject their proposed new contract with the automaker, a real worry as recently as Friday, are beginning to fade: A tally late Sunday showed a solid 62% in favor, following on votes by key locals over the weekend.
Credit this one to cooler heads prevailing. While early votes reflected many workers' initial anger at what they saw as continued austerity, a few days' reflection seems to have brought the sense that this deal might really be the best one available, as UAW leaders have been saying for a week.
That's a good thing, because it probably is -- even if that has been hard for some workers to see.
A good deal that looks forward, not back
Given the reality of industrial America, from the perspective of an average outsider who has never experienced anything like the pay and benefits seen in Old Detroit, the new contract looks like a great deal. It preserves a high hourly rate, enhances a robust suite of benefits (including a generous health-insurance plan and educational opportunities), boosts annual profit-sharing opportunities, and will pay a near-immediate bonus to every worker once it's ratified. And all of its key provisions are more generous (in some cases much more generous) than those at Ford's Detroit rivals.
Longtime workers, though, feel like they've given up a lot -- and that's understandable, because it's true. Benefits that a generation of auto workers took for granted were slashed in the last contract. More to the point, these folks haven't had a raise in years, and under the new contract, they won't have a raise for at least four more. And given Ford's recent prosperity, raises given to white-collar rank-and-file, and the large pay packages CEO Alan Mulally and other executives received over the last year, some are left rankled.
A lot.
But the reality that's sinking in is that this contract could have been a lot worse. Ford's offering real money, even if it's not in the form of a cost-of-living increase. And -- more importantly, from a longer-term perspective -- Ford's not only committing to continued manufacturing in the U.S., but it's actually increasing its efforts here. And with a lineup of profitable models that (finally) compete well with imports such as Toyota (NYSE: TM) and Honda (NYSE: HMC), Ford's prospects as an employer for the long term are looking brighter than they have in years.
Voting is scheduled to conclude Tuesday night. At this point, it's looking likely that the contract will be approved by a solid margin. That should be a relief for shareholders, though again, the details will be worth watching.
Up soon: management's perspective on the deal?
Management at General Motors (NYSE: GM) chose to present its perspective on that company's new UAW contract to analysts and the media soon after voting at GM plants ended. Assuming that Ford's contract is in fact approved by workers, Ford executives may make a similar presentation later this week. Expect management to reassure investors that the company's breakeven point has not changed significantly.
But while I expect they'll be right, the details will be worth watching: Ford's costs, though much lower than they used to be, were already on the high end of industry averages before this new contract. GM CEO Dan Akerson has said that his company could still eke out a profit even if U.S. auto sales fell to an annual rate as low as 10.5 million. As a shareholder, I will want to hear something similar from Ford's leaders -- and to see numbers supporting such an assertion.
But with this crisis averted, Ford's stock is back to looking like a bargain -- one that potential buyers might want to take advantage of before the company reports earnings next week.
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