Ford Auto Workers Weigh Buyout Offers
FARAI CHIDEYA, host:
From NPR News, this is NEWS & NOTES. I'm Farai Chideya.
Today Ford Motor Company's 75,000 American factory workers can actually get paid to quit. Ford says it needs to trim its blue-collar force by 30,000 people if it wants to return to profitability. But the company doesn't want to actually fire anyone. They want to entice workers to leave on their own with incentives like lump-sum payments of up to $140,000. Workers who leave can also qualify for résumé writing seminars and tuition reimbursement.
For more, we're joined by Sarah Webster, automotive reporter for the Detroit Free Press. Welcome, Sarah.
Ms. SARAH WEBSTER (Reporter, Detroit Free Press): Thank you.
CHIDEYA: This step sounds drastic, Sarah. Is it unexpected?
Ms. WEBSTER: It's not at all unexpected. If anything, investors and some people in the auto industry had been begging Ford to make this step. General Motors Corp. earlier this year did something quite similar. And it's really the only way Ford can get its workers out of the existing UAW contract in a way that's amenable to the union. They have a contract and if they wanted to fire these workers any other way, they would have to continue paying them.
CHIDEYA: The UAW traditionally has been one of the biggest, most powerful labor unions in America. Is the union, because of Ford's woes, being forced to take whatever the company offers?
Ms. WEBSTER: The short answer would be yes. The union still does have power in Detroit even though its membership keeps dwindling away at a rapid pace. But the union has a lot of say and Ford needs to do whatever they can to get the UAW's buy-in on this.
CHIDEYA: What pushed Ford to this point?
Ms. WEBSTER: Really, it was high gas prices and a massive shift away from SUVs. They've all been preparing for this day. But what happened when the hurricanes hit the Gulf Coast last summer, gas prices went higher faster than anyone expected. And this exodus that they had been anticipating would lead customers out of the big SUVs into other kinds of vehicles, it just happened a lot faster than anyone predicted.
CHIDEYA: First of all, do you think that the 30,000 workers that Ford is looking to leave will do so, or more?
Ms. WEBSTER: You know, I talked to the head of their labor affairs program this week and I asked him that question, and he wouldn't comment on what their, you know, targets are or what he anticipates. The fact that Ford has not named all the plants it will close really leaves a lot of employees hanging. You know, they don't know if their facility is going to be one of those to be shuttered. So, you know, I guess if I'm a worker and I don't know what my future looks like if I stay, I might be more inclined to leave.
So I think the numbers will be high. Ford has also offered a greater menu of buy-out options to workers than General Motors did. They're offering some tuition reimbursement programs that GM did not offer. And so, you know, there might be more enticement there as well.
CHIDEYA: Apparently, there are eight different buy-out options. Can you run through, you know, some of the other specifics besides tuition?
Ms. WEBSTER: Well, three of them are really classic early-retirement programs, you know. If you're close to retirement already, they may give you a lump-sum payout and encourage you just to take retirement early. And those are kind of classic in nature. They also have a special termination of employment program where workers can get a lump sum of $100,000 plus medical benefits for six months. There's an enhanced special termination of employment program where workers can get a lump sum of $140,000 if they have at least 30 years of service in, or are at least 55 and have 10 years of service. And, you know, there are different pension kind of outlays for those kinds of programs.
And then they have three educational programs. One is workers can get up to 15,000 of tuition a year for up to four years. One is similar to that, except that workers can get two years of paid tuition and 70 percent of their wages at the same time. And then the third retirement program is a family scholarship.
CHIDEYA: That's not a cheap option to offer that many workers incentives, but apparently that is the most prudent thing that Ford thinks it can do under these circumstances. So finally, what is Ford going to look like after all this?
Ms. WEBSTER: You know, I think Ford's going to be a lot smaller. It's going to be a lot lighter. Getting through these two years, though, where they're going to lose all these employees, it's also going to be very strategically draining for the company.
I mean, think of all the workers they are going to have to move around to different plants in different cities. And also there's a lot of cash involved here. I mean if they pay all these workers to take these programs, that's a big expense for Ford over the next few years. And some people who watch the company are wondering, you know, Ford has about $20 billion in cash right now, or $23 billion I should say, and, you know, this is going to be pretty expensive. Ford hasn't really given any solid estimates on what it will cost to do this. I think it cost GM about 3 billion. So that's going to eat away at their cash reserves for the next few years.
CHIDEYA: One last thing, what will happen to Detroit as Ford makes these changes?
Ms. WEBSTER: It's clear that a way of life is dying here, and that's kind of the way of life that many people in Detroit embrace and some people on the outside kind of look down upon, which is kind of this union-built culture. Getting paid a lot to build cars on an assembly line is something that many people on the outside perhaps perceive as, in kind of a demeaning way maybe, as, you know, line work or just, you know, doing one thing repetitively over a long period of time.
And clearly this whole economy in this country, and not just in Detroit, is shifting to one where creative people who have ideas are more valued. And I think that Detroit is trying to adapt and I think it will.
It's a gritty town here and people really kind of know how to get down and dirty and fight in this town. And I think that Detroit will be fine in the long run. I really believe that. As someone who covers all these stories day in and day out of people losing their jobs and automakers losing money, I really do believe that they're going to get it right and that things are going to be okay here.
CHIDEYA: Sarah, thanks so much.
Ms. WEBSTER: Thank you.
CHIDEYA: Sarah Webster is automotive reporter for the Detroit Free Press.
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