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Analysis: Rejection of Ford-UAW deal spells trouble for region, industry

November 1, 2009

Analysis: Rejection of Ford-UAW deal spells trouble for region, industry

The Detroit News

Workers at Ford Motor Co. have overwhelmingly rejected an agreement negotiated between the company and the United Auto Workers last month, creating a new challenge for the Dearborn automaker and raising serious questions about the future of labor relations in the troubled industry.

The last votes are being cast Sunday, and the union will not release official totals until voting is completed. But voting results from locals nationwide make it clear the deal — meant to match concessions the union negotiated with General Motors Co. and Chrysler Group LLC during their recent, government-mandated bankruptcy reorganizations — failed to win approval from rank-and-file members by a wide margin.

That spells the end of the pattern bargaining system that has defined relations between the UAW and Detroit’s Big Three for decades. For the first time in recent memory, one company has been placed at a disadvantage to its cross-town rivals.

But experts say the unexpectedly fierce opposition to the UAW-Ford agreement also is a bad sign for the industry and the region.

"The labor harmony that we had achieved seems to be falling apart," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "This really reinforces that negative image of Michigan, and that impacts more than just the auto industry. It really reflects poorly on the whole industrial Midwest."

Workers say no to concessions

Gary Walkowicz, one of the union dissidents who led the campaign against ratification, said workers made their voices heard on the top floor of Ford’s world headquarters.

"We sent a clear message to the company," he said. "The time for concessions is over."

He and other UAW members who opposed the deal say Ford’s comparative strength makes further give-backs unnecessary. They say workers bore the brunt of the company’s austerity measures and believe executives should now be thinking about how to restore some of those lost benefits once the automaker returns to profitability.

Though Ford reported a surprise second-quarter profit of more than $2.2 billion this year and is expected to beat Wall Street expectations when it posts its third quarter results Monday, the company is not expected to be back in the black until 2011. It lost a stunning $14.6 billion last year and is saddled with tens of billions of dollars in debt — unlike GM and Chrysler, which shed most of theirs in bankruptcy court.

Ford’s comparative success can only be viewed as such against the backdrop of an industry in the midst of one of its worst crises ever, said analyst Rebecca Lindland of IHS Global Insight.

"The auto market is still 5 million units short of where it should be," she said. "Ford may be better off than GM and Chrysler, but it is hardly in good financial shape."

Absent the concessions made by the UAW over the past couple of years, she said the company would still be at a serious competitive disadvantage versus foreign automakers. As it stands, Lindland said the union’s rejection of this latest accord leaves Ford at a clear disadvantage to its domestic rivals.

Ford now faces the prospect of entering into national negotiations with the UAW in 2011 as the only automaker the union can strike, meaning it is likely to become the focus of any efforts to win a better contract.

Though the automaker also wanted to match the freeze on entry-level wages and changes to work rules that GM and Chrysler won from the UAW, company executives said privately that winning at least some protection from picketing was the main goal of these negotiations.

Ford’s failure to do so challenges its own long-held belief that it had a better relationship with the union than either of Detroit’s other car companies. Much of the credit for that has been given to the Ford family, and family members such as Executive Chairman Bill Ford Jr. have cited this as a reason why Henry Ford’s heirs are justified in maintaining their control of the corporation despite a greatly diminished ownership stake.

Ever since its decision to forgo a federal bailout, the Dearborn automaker has tried to perform a difficult juggling act, trumpeting its comparative financial strength to Wall Street while at the same time pleading poverty to workers to win the same concessions their union granted to its bankrupt competitors.

"They were really trying to play both sides at the same time, and that is hard to do," Cole said, though he said the automaker was not really being disingenuous. "Ford is in good shape, but if they can’t be competitive, they won’t be in good shape for very long."

Ford spokesman Mark Truby said the company would not comment until voting is completed and official results are announced.

Defeat is blow to Bob King

Those voting no also sent a powerful message to their union leaders.

UAW President Ron Gettelfinger and his lieutenants lobbied hard for ratification, but many workers said they only supported previous concessions because union leaders promised to fight for the restoration of lost benefits once Ford’s finances began to improve. Though Ford will likely lose billions this year, many workers viewed the company’s second quarter profit as proof that the worst was over. They looked to Gettelfinger and his team to make good on those pledges, not ask them to make additional concessions.

"This no vote doesn’t mean UAW members are greedy," said Shane Harper, who works at the Chicago Assembly Plant. "It means the membership is sick of living in fear."

The defeat is a personal one for UAW Vice President Bob King, the man who negotiated the failed agreement with Ford and one many saw as Gettelfinger’s heir-apparent.

"That may have come off the track, which is unfortunate because he is a very good leader," Cole said.

Labor expert Harley Shaiken of the University of California, Berkeley, called King one of the "intellectual heavy-weights" of the union — one who negotiated this agreement because he knew it was essential to preserving the pattern bargaining arrangement that has guaranteed better wages and benefits for the union as a whole.

Prior to last week, King had the backing of more union leaders than any of his rivals to replace Gettelfinger, according to sources familiar with the situation. But they said some of those officials may be rethinking their choice in the wake of this defeat.

"The sign of a good leader is that you can agree to something and then sell it to the membership," said Gary Chaison, who teaches labor studies at Clark University in Worcester, Mass.

No vote will have consequences

The next move will likely be Ford’s.

Company sources said there would be consequence for the UAW. They said several product lines that would be cheaper to manufacture elsewhere were promised to American factories as a reward for union’s cooperation. Now that workers have made it clear they are no longer willing to cooperate, at least some of that production could be transferred to other countries.

Gettelfinger said many workers were misled by dissidents, but also said there was "no reason to go back to the bargaining table."

"We have a democratic process in place. People have a right to express themselves," he said. "We recognize there’s a lot of misinformation about it out there, but that is what it is."

Members of the Canadian Auto Workers voted overwhelmingly this weekend in favor of a new agreement with Ford Motor Co.

"No one should mistake workers’ approval as satisfaction with the new agreement," said CAW President Ken Lewenza. "Members had faith in the union to negotiate the best agreement possible and protect their interests over the long term, but the problems faced by industry cannot be resolved at the bargaining table."

About 83 percent of workers voted in favor of the new agreement, which gives Ford the same concessions the CAW negotiated with General Motors Co. and Chrysler Group LLC earlier this year as part of a bailout by the Canadian government. They include a wage freeze, the elimination of one week’s paid time off and higher medical co-payments. Ford also will shutter its assembly plant in St. Thomas, Ontario, eliminating about 1,400 jobs in 2011.

The concessions are the same ones CAW members granted GM and Chrysler as part of a bailout deal with the Canadian government. Without them, Ford told the union it would begin moving production out of Canada.

The new agreement also extends the current contract to September 2012.

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