Ford-UAW Deal Helps Ford Distance Itself from GM, Chrysler
Ford put some additional daylight between itself and rivals Chrysler and GM, in winning union approval for additional concessions from the UAW on March 9. Ford is expected to provide additional details on March 11.
To give Ford credit where credit is due, I’ve been on Ford’s case for a while now, expecting that sooner or later, Ford will have to break down like Chrysler and GM and ask for an additional bailout, on top of its share of $25 billion approved last fall to help the car companies develop more fuel-efficient cars and trucks.
GM made it plain in its fourth-quarter results that GM is still operating only because of the government bailout it received at the tail end of 2008.
I continue to think Ford will need additional help, because Ford sales are down just as much as Chrysler and GM and the rest of the industry. But the latest UAW concessions are a certifiable advantage over Chrysler and GM. The latest deal probably represents some additional time in which Ford can hang on without additional government help, in hopes that sales will finally start to improve.
Ford, Chrysler and GM are all looking for concessions from the union, on top of an all-new labor agreement that was reached in 2007. A key part of the 2007 agreement established a Voluntary Employee Beneficiary Association health care trust.
The trust will take over responsibility for health care costs from the Detroit Big Three, starting next year. Meanwhile, the car companies are obliged to contribute to the VEBA trust. An additional concession the car companies want now is for the union to agree to accept VEBA contributions in the form of shares in the companies, instead of cash.
Only Ford so far has gotten the UAW to agree, which reduces Ford’s debt and helps it preserve cash. Ford continues to insist that it has no plans to ask for a bailout.
In a conference call on March 3, Ken Czubay, Ford vice president, sales and marketing, said that to regain profitability, Ford is sticking to its strategy of introducing new models and trying to reduce price discounts and incentives. “We are zigging while some of our competitors are zagging in incentive world,” he said.
Nevertheless, Ford’s U.S. sales were down 48.3 percent in February versus the year-ago month, according to AutoData Corp.
Jim Henry has been writing about the auto industry from a business perspective for more than 20 years. He is also a member and past president of the New York-based International Motor Press Association.
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