The United Auto Workers union says it's extremely disappointed by Ford's restructuring plan, announced Monday. The automaker plans to eliminate up to 30,000 jobs over the next six years. The union says it will rigorously enforce job security provisions to protect those workers.
Instead of cutting jobs and closing factories, the union says, Ford should be trying to boost sales by offering consumers innovative and appealing products.
Ford has been losing market share for a decade, and last year the company's factories were more than 20 percent idle. Professor Norman Solomon, who specializes in labor relations at Fairfield University, says that puts the UAW in a difficult spot.
"They find themselves in a very tough bargaining situation, perhaps not of their making. One could make the argument that management should have made certain decisions earlier about product line which they didn't make, and that's left everyone open to these drastic measures," Solomon says.
Unlike many workers facing pink slips, though, UAW members have a financial cushion. Their union contract requires that even laid-off workers continue to receive base pay and benefits. Harley Shaiken, a labor expert at the University of California, Berkeley, says that's a very strong protection, but he adds it's only guaranteed through the current contract, which expires in September of next year.
"Given the crisis in the industry, that's a fragile net," Shaiken says. "And it doesn't create jobs for the future, or really cushion the blow for the communities at large."
Ford hopes to make some of the job cuts through attrition and offer buyouts to other workers. The company estimates those buyouts and other restructuring costs will total $470 million this year.
The Fitch bond rating service says if Ford hopes to achieve real cost savings from its restructuring, it will need cooperation from the union. Fitch Managing Director Mark Oline expects next year's contract talks to be long and contentious, dealing not only with job security but tough issues such as pensions and health-care benefits.
"Certainly with the financial stresses that both Ford and GM face right now, the competitive environment is not going to get any easier," Oline says. "From the UAW's standpoint, over the long term they would like to see a healthy Ford and GM."
Last month, the UAW agreed to accept a smaller pay raise in order to help Ford cut its health-care costs. The vote was close, though, with just 51 percent of union members in favor.
Despite the challenges facing U.S. automakers, the UAW remains a powerful union. Shaiken says its contracts still set the standard for the industry, even though one-in-four U.S. autoworkers now work at non-union, foreign-owned plants.
"Nissan and Honda workers are entirely non-union. But their wages and benefits are very much set in Detroit by what the UAW negotiates with Ford, GM and Chrysler," Shaiken says. "That has been the case to date. But how much longer that will continue remains an open question."
The balance could shift if American carmakers continue to lose market share. Toyota is likely to surpass General Motors as early as this year as the largest carmaker in the world.
As they head to the bargaining table, Shaiken says both the automakers and the union have doomsday weapons at their disposal: bankruptcy for the carmakers and a strike by the UAW.
"Bankruptcy is unlikely but not absolutely impossible, and I think everyone knows that. For the UAW, a strike would be very much a last resort, but it still is a resort if things can't be agreed at the bargaining table," Shaiken says.
The UAW says Ford's restructuring plan makes next year's contract talks "all the more difficult and all the more important."