DWNSHFT Reader
Nov. 5, 2009 4:58 p.m.

This is from today's Wall Street Journal. With all the discussion we've had about Ford, its' progress and future, I thought this would be interesting reading for you all. Also, it's fun to read some good news about one of our American car companies. Moderators, feel free to pull it if you feel it's not GRM enough.

How Ford Is Making Its Comeback The news from Dearborn is sunny, except for the auto maker's labor relations.

By PAUL INGRASSIA

A year ago, Ford Motor Co. steered clear of the auto industry's version of the "public option." You know, a government-funded bankruptcy. Maybe the decision wasn't entirely altruistic. Plan B, as in bankruptcy, would have ended more than a century of Ford family control.

Whatever the motives, Ford chose a private solution for regaining its corporate health, and today the patient is walking without a government crutch. Last week Consumer Reports gave the company quality ratings comparable to those of Honda and Toyota. On Monday, Ford reported its second consecutive quarterly profit—and more impressively, a swing from a $7.7 billion cash burn a year earlier to positive cash flow of $1.3 billion in the just-ended third quarter, helped by but not due to Washington's cash for clunkers program. The company gained a percentage of market share in the first 10 months of this year, no easy feat in an ultra-competitive market.

In fact, there's almost too much good news coming out of Ford's Dearborn, Mich., headquarters these days. In the often-bizarre world of labor relations in Detroit, good news can be bad news in dealing with the United Auto Workers union. Exhibit A is the UAW's recent rejection of contract amendments at Ford to parallel the provisions that the government imposed on GM and Chrysler. The implications aren't pretty for Ford and they're even worse for the union itself.

Before parsing those implications, though, it's worth examining Ford's recent spate of good news because there has been precious little of that from Detroit in recent years. The company's turnaround actually began three years ago with decisions that amounted to zagging every time that General Motors zigged, which was remarkable for a company whose strategy for decades was to follow GM.

When General Motors kept its CEO (the recently deposed Rick Wagoner) a few years ago, Ford brought in a new one, Alan Mulally from Boeing. While GM kept its unwieldy assortment of eight brands, Ford sold Jaguar and Land Rover, cutting its brand lineup down to a manageable size. (Another Ford brand, Volvo, appears close to being sold.)

The zig-versus-zag pattern continued when General Motors bet big on home mortgages through GMAC and then sold control of the financing unit, which now is on government welfare, just like General Motors itself. Ford avoided home mortgages and held onto its finance arm, Ford Motor Credit, choosing instead to mortgage all its assets to raise money to fund its turnaround effort.

Ford's self-help strategy carries a cost: The company now has much more debt than GM, about $27 billion to $17 billion, because the General had some three-fourths of its borrowings washed away in bankruptcy court. But controlling its source of dealer and consumer financing is a huge advantage for Ford, and the company is shoring up its balance sheet by swapping some of that debt for new equity.

What's more, shedding brands and shunning the mortgage business has helped Ford focus on quality, where it had slipped badly early in this decade. Consumer Reports said last week that 90% of Fords, Mercurys and Lincolns rate average or better in quality, right up there with Honda and Toyota. When the economy recovers and car sales increase, Ford could be in great shape. That presumably will happen by 2011, when the company says it expects "solid profitability."

It's sadly ironic, then, that the rain on this parade came the very same day that Ford reported its stellar financial results. Monday also brought the news that the UAW rejected contract amendments to freeze the pay of new hires, to forgo strikes for the next six years, and to reduce the number of job classifications in Ford factories.

The 70% vote against those changes was a stinging setback for the UAW's leadership, which had accepted similar provisions at GM and Chrysler in return for the government bailouts of those two companies. Obviously, Ford isn't desperate enough in the eyes of the union's rank-and-file, even though the company barely avoided bankruptcy, and its bond ratings remain deep in junk territory. UAW President Ron Gettelfinger tried to contain the damage by telling Automotive News that the proposed contract changes would have saved Ford "only" about $30 million a year anyway.

But that statement has more spin than Mariano Rivera's cut fastball. Forget about the wage freeze and the no-strike clause. Factory wages aren't Detroit's problem, and strikes are very rare in the auto industry nowadays. The real issue is the job classifications.

Ford's UAW contract has lots of them, governing who can and who can't perform specified tasks on the factory floor. So if a machine breaks down, an assembly line can come to a halt while everyone waits for the worker with the proper classification to arrive at the scene. If other workers nearby are perfectly capable of fixing the machine, well, that doesn't matter. The number of job classifications is less than it was a decade ago, but it's still far too many to maximize a factory's efficiency.

The classifications and attendant work rules are enforced by union bureaucracies—members of each plant's shop committee, grievance committee, health and safety committee, etc. They're all paid by the companies, as are their legions of corporate counterparts. One man's feather-bedding is another man's job.

All this begs a fundamental, and uncomfortable, question. Can a UAW-represented car company compete effectively, long term, with its nonunion competitors? At the very least, companies organized by the UAW have lots of extra costs to bear at their factories located in the U.S.

It's interesting, then, that Consumer Reports rates the quality of the four-cylinder Ford Fusion higher than the Toyota Camry and Honda Accord, and the Lincoln MKZ higher than its Acura and Lexus counterparts. The Fusion and MKZ are built in a factory without job classifications because it's in Hermosillo, Mexico, and isn't represented by the UAW. If Ford targets future expansion in Mexico, the recent contract vote will spell further decline for a union that, like Detroit's car companies, badly needs cultural change.

Ford's shares jumped more than 8% Monday on the company's earnings news. But investors should understand that in buying Ford stock they're also buying the company's relationship with the UAW, with all its implications.

[Mr. Ingrassia is a former Dow Jones executive and Detroit bureau chief for this newspaper. His book "Crash Course," about the recent bankruptcies and bailouts of General Motors and Chrysler, will be published by Random House in January.]

WSJ Article

skierd Dork
Nov. 5, 2009 5:07 p.m.

Maybe Ford can sell the UAW contract to GM and Fiatsler and tell the union to go berkeley themselves. Or let them strike, tear up the contract, and start fresh with non-union workers. Stop biting the hand that feeds...

Nov. 5, 2009 5:33 p.m.
DWNSHFT wrote: Can a UAW-represented car company compete effectively, long term, with its nonunion competitors? At the very least, companies organized by the UAW have lots of extra costs to bear at their factories located in the U.S.

No, they can't. and they should move more of their factories to Mexico if the union insists on extorting the company.

gamby SuperDork
Nov. 5, 2009 5:38 p.m.
Buzz Killington wrote: and they should move more of their factories to Mexico if the union insists on extorting the company.

I think that would do MUCH more harm than good. They just built up some great PR--it would go down the toilet if they moved a bunch of their operations to Mexico.

kreb Dork
Nov. 5, 2009 6:36 p.m.

It's too bad that the union's being so short-sighted. The job classification business is one of the reasons that my shop went non-union. While a bit more flexibility might hurt a few assorted people, it would seem to benefit the greater good.

Thanks for the post. Good read.

carguy123 Dork
Nov. 5, 2009 6:44 p.m.

Whoops, I dropped a bolt, let me ring for the bolt picker upper. Let's stop the line while we wait for him to get off his coffee break.

Whoops, now I dropped one of my tools, let me ring for the tool picker upper. Let's stop the line while we wait for him to return from his mandatory safety training session.

AngryCorvair SuperDork
Nov. 5, 2009 6:47 p.m.

this gives me LOLz because GM and ChryCo are now partly owned by the UAW, per the gubmint bailouts, yes? So why is anyone surprised that the UAW is trying to jam it up Ford's ass?

RossD HalfDork
Nov. 5, 2009 7:14 p.m.

To me, labor unions have no place in the USA. They have a purpose in developing nations keeping people safe and making things fair for workers, but now days its just extortion. Ford should do what ever they can to shed the extreme weight of the UAW and get on to a level playing field with the import car manufacturers already building cars in the US without unions. But what do I know, I'm just a guy on a forum.

ignorant SuperDork
Nov. 5, 2009 7:49 p.m.
carguy123 wrote: Whoops, I dropped a bolt, let me ring for the bolt picker upper. Let's stop the line while we wait for him to get off his coffee break. Whoops, now I dropped one of my tools, let me ring for the tool picker upper. Let's stop the line while we wait for him to return from his mandatory safety training session.

yeah no crap...

Welcome to my world.

ignorant SuperDork
Nov. 5, 2009 7:53 p.m.

One of the common complaints at my work is that the company is moving operations to Georgia becase they want to make more profit.

I ask them if they would rather work for a profitable or unprofitable company..

They then tell me that I'm screwing the poor working man.

Sorry people, I've seen your pay stubs. You're going to do over $100k this year. I don't think we're screwing you one bit...

skierd Dork
Nov. 5, 2009 8:15 p.m.

Just curious... when the current contract is up, whats stopping Ford from telling the UAW to pound sand and hire non-union employees to replace them? Other than the riots that will probably ensue of course... but I mean it can't be that hard to find someone who needs a job considering Michigan has some of the highest unemployment in the nation.

oldsaw HalfDork
Nov. 5, 2009 8:23 p.m.
ignorant wrote: One of the common complaints at my work is that the company is moving operations to Georgia becase they want to make more profit. I ask them if they would rather work for a profitable or unprofitable company.. They then tell me that I'm screwing the poor working man. Sorry people, I've seen your pay stubs. You're going to do over $100k this year. I don't think we're screwing you one bit...

Should you relocate, check WSB - "Welcome South Brother", 750AM on your radio dial.

Regardless of your liberal-leanings, Neal Boortz is a great source of entertainment, opinion and information. If you don't move from the cold climes of CT (I know it sucks because I grew up there), listen to Boortz - he'll get your blood boiling and your mind reeling one way or another.

JetMech Reader
Nov. 5, 2009 11:41 p.m.
RossD wrote: To me, labor unions have no place in the USA. They have a purpose in developing nations keeping people safe and making things fair for workers, but now days its just extortion.

They're an annoyance, too. What baffles me is why people (specifically the Wal-Fart workers interviewed for a TV special I watched last month) still want to unionize. Any pay raise you'd get would in large part--if not its entirety--be pissed away to the union.

Interesting read, though Ford won't see me walking into one of their showrooms anytime soon. Almost everything they currently have on offer is just too damn expensive and/or ugly.

gamby SuperDork
Nov. 5, 2009 11:49 p.m.
JetMech wrote: What baffles me is why people (specifically the Wal-Fart workers interviewed for a TV special I watched last month) still want to unionize.

Oh, I don't know--maybe all of those pesky incidents of being shorted overtime or other shenanigans related to working and not being paid.

A lot of retail companies test the "limits" of their workers. Then they have special management trainings on how to prevent unionizing.

I deal with a loss prevention guy who would be gone in a second if there were a union. Instead, everyone is too afraid to report him to HR.

blaze86vic Reader
Nov. 6, 2009 12:20 a.m.

I've always been pretty upset with our national news not reporting on the total burden that greedy America has placed on American companies. Most legal Mexican laborers do well in this country, and a lot of them get ahead fast. I personally think that's because for the most part, they work harder, appreciate what they have, and strive to go farther, instead of just demanding more without earning it. And I'm proud to see this in our country, the land of opportunity still living up to it's name. And the decent companies that hire them accelerate at the same rate their employees do. At least that's been my experience in my area.

When I worked as a groundsman in tree removal, I worked as hard as I could, and I always kept in mind that I was being paid to help get a job done in timely profitable fashion. I knew how much we were charging, and I knew how long we had to do the job in. If it took longer than we priced it for, and I felt that I contributed to it, then I would only ask for the hours that we priced the job at because I failed to do what I was paid to do, and more importantly, money that keeps the business going would get sucked up by my slackness. He knew I did this, and he always treated me with kindness, respect, and generosity, and would almost always force the pay on me either way. I used the same principals when I work for the government and entered my own time sheets. The fact that the rest of the world views the US as Fat Lazy America, isn't purely ignorant US hatred, it's based on some truth. And I think that the UAW is a prime example of this. I'm not just a USA hater, I love my country, but I do think that our society has greatly moved towards a "I gots mine'z" mentality, and away from an "earn your way" society.

Wally SuperDork
Nov. 6, 2009 1:56 a.m.
RossD wrote: To me, labor unions have no place in the USA. They have a purpose in developing nations keeping people safe and making things fair for workers, but now days its just extortion. Ford should do what ever they can to shed the extreme weight of the UAW and get on to a level playing field with the import car manufacturers already building cars in the US without unions. But what do I know, I'm just a guy on a forum.

You've never worked at a company where it's management spends all it's time trying to figure out how best to berkeley it's workers. I have a group of bosses whose bonuses depend on how many people they can keep of the payroll on a given day.

ignorant SuperDork
Nov. 6, 2009 5:02 a.m.
oldsaw wrote:
ignorant wrote: One of the common complaints at my work is that the company is moving operations to Georgia becase they want to make more profit. I ask them if they would rather work for a profitable or unprofitable company.. They then tell me that I'm screwing the poor working man. Sorry people, I've seen your pay stubs. You're going to do over $100k this year. I don't think we're screwing you one bit...

Should you relocate, check WSB - "Welcome South Brother", 750AM on your radio dial.

Regardless of your liberal-leanings, Neal Boortz is a great source of entertainment, opinion and information. If you don't move from the cold climes of CT (I know it sucks because I grew up there), listen to Boortz - he'll get your blood boiling and your mind reeling one way or another.

OK... I'm game for anything.

Gearheadotaku Reader
Nov. 6, 2009 6:50 a.m.

A rep from a union stopped by my old job every now and then. They wanted our company to join them. He spouted about getting higher wages, better benefits, etc. Too bad for him the company was family run and treated its employees like gold. We had great benefits, loads of vacation time, and nice supervisors. We pitched that rep out on his tail several times before he got the hint. "We work hard at our jobs and the company treats us well for it. Why do we need a union?" "it's the lazy berkleyer drinking beer at lunch and calling in sick twice a week that needs a union"

Xceler8x Dork
Nov. 6, 2009 7:10 a.m.

Some companies do not treat their employees well, historically or presently. Those employees need a Union. Most companies have wised up and now do treat their employees well.

Read "The Jungle" and you'll see what improvements Unions have brought to you. Silly things like a 40 hour work week, fair treatment from management, and a higher wage.

I'm not saying Unions are still needed nor am I saying Unions aren't detrimental as they've gotten stronger. "The new boss, same as the old boss" is evidently true at times.

But Unions have, and still do in some cases, some good.

RossD HalfDork
Nov. 6, 2009 7:16 a.m.
Wally wrote:
RossD wrote: To me, labor unions have no place in the USA. ...

You've never worked at a company where it's management spends all it's time trying to figure out how best to berkeley it's workers. I have a group of bosses whose bonuses depend on how many people they can keep of the payroll on a given day.

Wally, you're right. But I have seen a union come into a business and completely smash it into the ground. But heres my thought with your comment. You can leave a company if they treat you badly. A company basically cant leave a union without the chance of destroying the company. It's not a two way street.

kreb Dork
Nov. 6, 2009 8:01 a.m.
I have seen a union come into a business and completely smash it into the ground. But heres my thought with your comment. You can leave a company if they treat you badly. A company basically cant leave a union without the chance of destroying the company. It's not a two way street.

x2

I'm no union basher. But the fundamental issue is human nature. People with power will very often abuse it. The union has power, ergo, they abuse it. Furthermore, unions have spent a long time honing their techniques, and aquiring other friends in power. They need to be sunject to reasonable restraints on their power just like any other organization.

In my business, the union holds a monopolistic power over the training programs, which enables them to control the lions share of the high-end market sector (excluding a few hold-outs such as myself). One could say that they are entitled to that position because of the investment that they've made in training and education, but it's still a monopoly, and they actively do things like convince building owners to adopt union only policies on their properties.

Now the issue of the unions having an equity stake in the competition is a huge one. Talk about a disincentive to excell! Not wanting to go political here, but it sure looks like yet another bad result of the poorly thought out initiatives of the current administration.

Wally SuperDork
Nov. 6, 2009 9:30 a.m.

I wish our unions were as well organized as these other ones. Luckily they don't have to be. The people that run the authority seem detemined to kill it so we don't have to be bothered.

Dr. Hess SuperDork
Nov. 6, 2009 10:38 a.m.

I've seen unions from the inside. I know people that know people that know where the bodies are burried. I may know people that know where the bodies are burried.

For an interesting look back at our history, look into the history of the US Maritime Unions. In the 30's, people were dieing so that sailors could have canned milk while at sea. Literally dieing, as in murdered, on both sides. Before that, the companies treated sailors as scum and fed/paid them accordingly. Historically, it has always been so bad that sailors are still technically wards of the US Federal Government. Unionizing the US Merchant Marine industry brought some balance to the equation. Then it went too far, to the point that when I quit, you were better off negotiating directly with the company yourself, as the Union was just there to suck money from both you and the company and had become its own reason for existance.

It is interesting that as the UAW owns the majority of Chrysler, even though Fiat gets all the publicity, and the UAW owns a bunch of GM (I forget how much), the UAW has an interest in destroying Ford. They could come out either owning Ford also or boosting sales at Chrysler/GM, which they own. Ford responds by outsourcing or offshoring their production, thus further harming the US economy and you and me. When Juan in Hermosillo gets more work, his dollars don't go to buy stuff that pumps back into our pockets. Either the UAW is going to have to back off of Ford or Ford is going to fold. I don't see Ford kicking the UAW out. Ford's other choice would be to just keep offshoring production. That screws the rest of us too.

RossD HalfDork
Nov. 6, 2009 10:50 a.m.

Just because they arent pumping money back into the US economy doesnt mean that Ford has to fold. They're a global company.

Schmidlap Reader
Nov. 6, 2009 11:02 a.m.
AngryCorvair wrote: this gives me LOLz because GM and ChryCo are now partly owned by the UAW, per the gubmint bailouts, yes? So why is anyone surprised that the UAW is trying to jam it up Ford's ass?

Because it's not the UAW management, (i.e. the people who might actually have some say in how GM and Chrysler are run) who rejected this offer. Ron Gettlefinger was lobbying very hard to get Ford union members to accept this contract. The Ford workers will have absolutely zero input into how things are run at Chrysler, and they are the ones who rejected the offer at Ford.

Despite having a large stake in it's domestic competitors, the UAW stands to gain a lot if Ford can get back to being a stable company without bankruptcy. They could then point to Ford as proof that an automaker with union represented workers can compete with their non-union competitors, and could spin it that "all Ford needed was a CEO who knew what he was doing, which is what we, the UAW, have been saying for years - we were not the problem". It's complete crap, but they could say it.

By 'jamming it Ford's ass', the UAW runs the risk of forcing Ford into bankruptcy, where Ford could then force the UAW into larger concessions than they were forced to give to GM or Chrylser.

Bob

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