Ford layoffs: how much responsibility does the UAW have?

Great Debates
1

30,000 people are to be laid off by Ford in the near future as Ford fights for its existence. There are many factors in this, foremost of which is the diminution of market share that Ford has suffered at the hands of foreign competition, but there are others.

  1. Design- the vehicles they are producing are clearly not what people want.

  2. Reputation- they have a bad reputation in the core categories, with the exception of trucks and SUVs. This reputation is partially because they are still not made as well as foreign vehicles, partially because they made absolute garbage a long time ago and people remember that, and partially because rebates have cheapened their products as people now will not pay sticker because they expect the discount.

  3. Scandals- the Firestone/Explorer thing really hurt them, as did the recall on their halo car, the GT, and the numerous recalls of the Focus, their popular compact. It goes toward reputation, but it really stands alone as indicators of both poor reputation and design.

However, they are also burdened with massive pay, healthcare, and pension problems. The average UAW worker makes well over $20 per hour with benefits, and what has Ford gotten for this outlay? Reduction in market share on a grand scale, shoddy construction, and burdensome obligations that threaten to drive Ford out of business.

Has the UAW basically negotiated Ford out of business? I think they may have. Ford, of course, is complicit in the deal because negotiations go both ways, but check this out: all UAW workers laid off this year get full base pay and benefits until September of next year. Those that don’t continue to make up to 5 times the current minimum wage plus benefits, which is a deal that a lot of people would kill for, except that unions are a bitch to get into. It is estimated that Ford will have to pay $475 million this year to do the layoffs. And, of course, they still have to negotiate with the UAW, who will likely do what the airline unions did and fight tooth and nail for what many would consider to be outrageous salaries.

But, again, what does Ford have to show for some of the highest salaries in the business? Poor reputation, inferior workmanship, defects galore, generally poor ratings from the media, and years and years of moribund sales.

Does the UAW bear any responsibility for this situation? Note that the same argument can be made for GM as well. How much of it is corporate, and how much is the union?

2

The UAW doesn’t design cars, they build them. Management green-lighted the design. They are responsible.

The decision to make cheap pieces of shit was made by management, not the UAW. Management is responsible.

Poor design, and the company’s response to these problems are a direct result of management’s decisions and actions. They are responsible.

Dog-sitters make $15+/hour around here. $20/hour doesn’t seem so terribly extravagant, especially when you consider the multi-million dollar salaries and perks lavished on those who made all the decisions you were just bemoaning. The UAW is not responsible for the cost of healthcare in this country. That distinction goes to the Congress and everyone who tut-tuts universal health care because of the “cost” (of which you’ve just given an excellent example).

Short answer: No.

It would be interesting to compare and contrast management and workers’ benefits between US and Japanese auto makers. Anyone?

3

How do these factors compare to their competitors? I imagine most American companies have similar deals with their automotive workers, Germany is known for having strong unions and though I don’t know much about Japanese industry, I don’t picture their automotive workers living on pennys a day.

In anycase, Ford and GM made their union deals with their workers at a time when they were the leaders in the industry. They expected their market share to continue, and created pension plans accordingly. Now that their market share has dropped, they no longer are making the profits they expected, and can’t pay their legacy costs. To blame these costs for their not being able to retain their current workforce, then, seems somewhat circular.
As an aside, from personal experience, their products are crap. I’ll never buy a Ford car or truck again, and if a couple million other customers have had similar experiences, then I would guess that explain their problems.

4

from here (I googled “Ford Motor executive salary”)

  • William Clay Ford, Jr., chairman and CEO, received no cash salary in
  1. In lieu of a cash salary equivalent to $1.5 million, he was awarded
    103,882 shares of restricted common stock, tying his compensation to the long-
    term performance of the Company. He was awarded a 2004 bonus in the form of
    841,008 shares of restricted common stock and restricted stock equivalents
    with a fair market value of approximately $10.5 million at the time of grant.
    In lieu of other long-term compensation, he also received a stock option grant
    covering 1,587,301 shares. These options have a strike price of $16.49 and
    vest over a three year period. Mr. Ford also exercised stock options covering
    1,410,404 shares, realizing a value of $5.3 million, at the same time
    retaining the acquired shares. In addition, he received other compensation
    totaling $266,000.
    For the second year, Mr. Ford committed a portion of his bonus of
    restricted stock equivalents to the William Clay Ford, Jr. Scholarship
    Program, providing tuition assistance for children of Ford employees, and a
    remaining portion to Detroit charities.
*  Jim Padilla, president and chief operating officer, earned $966,667 in

salary and $2,034,910 in bonus, which consisted of $1.18 million in cash and a
grant of 69,000 shares of unrestricted common stock worth $854,910, as well as
$314,131 in other compensation. He also was awarded options to purchase
100,000 shares of common stock in long-term compensation. In addition, for
his performance in 2004, Mr. Padilla was awarded a bonus in the form of
246,696 shares of restricted common stock and received 50,000 restricted stock
equivalents as a long-term incentive grant, and for his promotion to Chief
Operating Officer. Combined, these shares and stock equivalents have a fair
market value of approximately $3,761,000 at the time of grant. Mr. Padilla
also received a Long Term Incentive Plan award of $173,460 which was paid in
unrestricted common stock for the 2002-2004 performance period. He also
exercised option grants covering 82,499 shares with a realized value of
$686,000, at the same time retaining 29,849 of those shares.

*  Greg Smith, executive vice president and president, The Americas,

earned $756,667 in salary and $1,120,970 in bonus, which consisted of a cash
award of $836,000 and a grant of 23,000 shares of unrestricted common stock
worth $284,970, in addition to other compensation totaling $48,227. Mr. Smith
also was awarded options to purchase 50,000 shares of common stock as a form
of long-term compensation. He also received a Long Term Incentive Plan award
of $105,315 which was paid in unrestricted common stock for the 2002-2004
performance period.

*  Nicholas Scheele, former president and chief operating officer, earned

$1,000,000 in salary and $1,514,530 in bonus, which consisted of a cash award
of $1,180,000 and a grant of 27,000 shares of unrestricted common stock worth
$334,530, in addition to other compensation totaling $397,985. He also was
awarded options to purchase 81,168 shares of common stock in long-term
compensation. He also received a Long Term Incentive Plan award of $929,250
which was paid in unrestricted common stock for the 2002-2004 performance
period.

*  Allan Gilmour, former vice chairman, earned $1,050,000 in salary and

$1,517,880 in bonus, which consisted of a cash award of $997,500 and a grant
of 42,000 shares of unrestricted common stock worth $520,380. Long-term
compensation for his services as vice chairman was 300,000 shares of
restricted common stock in 2004. In addition, he received $1,038,731 from his
retirement plans associated with his earlier years of service with Ford Motor
Company.
That over 31 million dollars between five people. In one year. You’re upset because several thousand people who have been laid off will receive benefits until September?

5

The average Ford worker makes over $50,000/yr, without overtime, not including benefits. I can’t find a cite, but I read somewhere that the non-union auto workers make about 15-20% less.

But I believe a bigger difference is that the foreign auto maker’s American plants are newer, with more modern flexible assembly lines, and they can build a car with significantly fewer man-hours than can some of the older factories of the big three.

The big problem isn’t the current cost structure of the cars, though, but the built-up retirement and health care liability that the big three auto makers have due to the sweetheart deals cut with the unions decades ago. It’s been said that GM is really a health care provider masquerading as a car company. Every car that comes off their assembly line carries an amortized $1500 cost in health care benefits that the company pays out, and its ratio of retired to active workers is about 2-1. $1500 is more than the total profit that some auto makers earn per vehicle, so it’s a significant amount.

6

I think the REAL problem for Ford (and GM) is that they made crap for so long. When I was a kid in the 70’s, most adults I knew were loyal to one of the Big 3. You’ll look a long time to find someone who won’t buy anything but Ford these days, but it’s not hard at all to find people who’ve owned three Hondas or Toyotas in a row. Brand loyalty isn’t a thing of the past; it’s just shifted to the companies who made consistently good cars over the past couple decades. Reputedly American cars have caught up to Japanese in reliability, but it’s going to take another 10 years before people will feel the same confidence in a Ford that they do in a Toyota.

I’m fairly sure it’s not the UAW’s fault that Ford built garbage all those years. The pension/benefit costs that are built into Fords doesn’t help I’m sure, but Ford’s problem isn’t that it can’t compete on cost with Japanese cars. It’s that it can’t compete in terms of perceived reliability.

7

What automotive pioneer’s stated goal was to build a car that his workers could afford?

$50k per year income: $18k list price for a car…sounds about right.

8

No. I’m not upset at all. I’m inquiring as to the degree that the unions have weakened Ford’s position as a company, if at all. I’m not a union fan, and my opinions are well known re: unions, but I’m asking for your thoughts. The above quote was not a thought, it was a diversion.

I disagree that they are exempt from some responsibility. They assembled the products, after all. When the car magazines get vehicles with loose and vibrating parts it’s not an engineering problem, is it? Not usually. It’s usually an assembly problem. So, how much of a burden should the union bear for Ford’s poor reputation?

9

According to the wikipedia article on Ford:

In other words, Ford is hiring fewer workers because it’s selling fewer cars, not because legacy costs are depleting the money it has to pay workers.

Could be, though I don’t usually hear “shoddy workmanship” as a reason for Ford’s crummy reputation.

10

I suspect that overtime inflates that salary considerably. Union operators at my plant make more than me, after 15-years as an engineer, at equivalent years of experience – because of overtime. I understand that GM plants run at similar overtime rates (we sell to oil and car companies).

However, comparing GM/Ford to Japanese car manufacturers isn’t as easy as comparing Japanese autoworker salaries to US union salaries. Because over half of the cars from Japanese companies in the US domestic market are manufactured in the US (60-70% are the numbers I’ve heard). And the workers for Toyota or whomever at these US manufacturing plants make US-equivalent salaries. But they’re usually not unionized plants, and their non-union employees probably don’t have as extravagant health-care and pension packages as the UAW negotiated.

There is some justification in saying that the Japanese manufacturers are advantaged by their government’s subsidization of engineering and design of new cars (particularly hybrids, recently). But in St. Louis we’ve recently seen Chrysler blackmailing tax concessions from the local municipality one of their plants is in, and we’ve seen similar concessions just offered to Ford in an attempt to keep their plant open.

Being involved in testing engines as part of my job, I’m not convinced that Japanese engineering is superior to US engineering, at least in terms of performance. I can’t speak to reliability and maintenance.

I think the bottom line is that the US auto manufacturers put all their eggs into the SUV basket, despite knowing that the market would decline because of what they knew of the oil industry and supply. Their plan to support all the UAW and other costs required sales volumes that they just can’t get with SUVs any more – they need high sales volumes to absorb their huge fixed costs; with lower sales volumes, the fixed costs are making them lose money for every car they sell.

The UAW, certainly, knows this fact. If they’re at fault, it is for being as willfully blind to reality as the Ford executives have been. Ford management, at least, seems to have woken up and finally made the hard decision they should have made long ago. I’ve seen no sign that the UAW has similarly accepted reality.

11

Were there some recent negotiations that the UAW failed to give any concessions on? Did Ford offer the UAW a plan that would have saved the 30k jobs?

BTW, I doubt that auto assmebly line jobs are min wage type jobs-- ie, no skill. But, as others have said, the automakers have huge liabilities in terms of health care and penions. Of course, it would help if they made some really cool cars like they used to. When I was growing up in the 60s, every kid on the block wanted nothing more than a Mustang or a Firebird.

12

Good for them!

13

So do I, but I’m a teacher with 10 years experience and two master’s degrees. Just food for thought.

14

Well, good for the ones left, anyway…

Until the next round of cuts.

15

You obviously are not aware of the “Stabilization of Employment Act” now pending in Congress. :slight_smile:

16

Obviously, the UAW workers aren’t responsible for making the companies so reliant on sales of SUV’s. It seemed like suicide to me just a year or two ago when it was still looked at as a good idea; now that gas prices are making them impractical, it looks like suicide to everyone.
Beyond that, some of the stuff that the workers get looks unreasonable from the outside, for sure. However, bringing up the $1500 in costs built into the cars from health is showing ignorance of the fact that they operate in the only country in the industrialized world stupid enough to think that healthcare should be paid for at the company level. That’s the fault of neither management nor the union, except to the extent that neither of them brought their very considerable political weight to bear on the question in any united way. That, come to think of it, was and is very very stupid, and they both bear responsibility for it in equal measure.

17

Ford’s given reason for the layoffs was because they had capacity that far outstripped demand. Of the two parties (management and the UAW), management had FAR more control over demand–they picked the models, marketing, choose the quality controls, set the companies directions, etc.

Therefore, I think think the UAW bears very little responsibility for Ford’s layoffs.

Just going by what Ford’s been saying.

18

One wonders who is going to be the US buyers of Ford cars if everyone here is working for $7 an hour.

The health costs put us at a disadvantage with respect to other countries, such as Canada, that have national health care.

Other manufacturers were shocked when Henry Ford raised his workers wages but Henry knew that some of that wage would be returned to his company when the workers bought Ford cars.

19

In support of this, according to here they’re cutting a quarter of thier workforce after having lost a quarter of their market share in the last 6 years. It seems bizarre to blame these layoffs on Ford’s pension/healthcare liabilities when the numbers clearly show they’re making 25% less cars (assuming total car sales have been more or less stable over the past 6 years), and common sense would dictate that’s why they need 25% fewer workers.

No doubt paying union benefits is a headache for Ford, and if the gov’t bailed them out or the UAW agreed to a cut in pensions, they would be better equiped to pull out of thier current deathspiral. On the other hand, by the same token, paying their employees at all is no doubt a burden, and if the gov’t just payed all the employees salaries no doubt Ford would be even more likely to reverse its fortunes.

20

Yes, but perhaps they are making 25% fewer cars because their high cost of labor has made them noncompetitive.