Car, Jack?

“Cash for clunkers” worked, if increasing car sales was the only goal. The United Auto Workers members at Ford looked at the numbers and seem to have bought into the mythology that the crisis for automakers must be over. Unfortunately, the “cash for clunkers” program is over; now the car-makers have to prove that even in this impaired economy – where consumers are most certainly putting off the “big-ticket” items absent some very strong incentive to the contrary – they can actually sell enough cars to survive. The prognosis is anything but clear.

To make matters worse for Ford, their local competitors, General Motors and Chrysler/ Fiat, have had the advantage – at least when it comes to union compensation and benefits – to have been able to restructure their union agreements through the bankruptcy process. While Ford avoided filing for Chapter 11 bankruptcy (reorganization) like its brethren, it most certainly faces the same harsh economic climate and consumer resistance without the benefit of being able for force an alternation in the impact of its collective bargaining agreements with the UAW. From a simply labor/fringe benefits cost perspective, going forward, GM and Chrysler/Fiat have a clear advantage over Ford.

Union leaders have sympathized with Ford’s plight and understand that what is at stake may be the very survival of a viable American car industry. They have supported Ford’s desire to match GM/Chrysler agreements, even though the proposed changes would represent the third round of concessions granted by the Ford UAW locals over the past two years. Unfortunately for Ford and the UAW leadership, these requests seem to have fallen on the deaf ears of the rank and file union membership that seems unwilling to budge any further.

The October 28^th New York Times: “Members of at least five local chapters of the United Automobile Workers union have turned down the proposed changes, which include a six-year wage freeze for newly hired workers, some job-classification changes and a provision that bars the union from striking over demands for better pay and benefits through 2015… The U.A.W.’s president, Ron Gettelfinger, has been urging workers to approve changing their contract, arguing that Ford is still heavily in debt and that workers could end up worse off if they do not agree to the deal. If ratified, the deal gives all hourly workers a $1,000 bonus in March and assigns new products to some plants, in some cases adding jobs.” The ratification vote by the Ford UAW locals, however, appears headed for defeat.

The big issue is, of course, the “no-strike” language that the U.S. government forced into the agreements with Chrysler and GM as a precondition to government investment into these failing companies, but it is hard to reconcile Ford having unions ready to strike while GM and Chrysler are assured of labor piece. The U.S. car business is teetering on the brink of total extinction. Will Ford be forced into Chapter 11 reorganization? Will one of more of the big three automakers take the bigger and final step of filing for total liquidation under Chapter 7 – vitiating warranties, eliminating the continued manufacture of the necessary replacement parts and decimating the resale value of cars made by defunct manufacturers? Time will tell, but the signs are not particularly good right now.

I’m Peter Dekom, and I approve this message.