UAW Attack On Chrysler Puts Pressure On Ford (F)

As the days pass and the UAW members vote on the union’s proposed deal with Chrysler, it appears that the agreement could be defeated. The Wall Street Journal writes that "workers at least three other plants have also rejected the contract inthe last few days, endangering the union leadership’s bid to get thedeal ratified."

Chrysler management has not promised to build any new plants in the US going forward. The company also wants to keep some manufacturing in Mexico. Workers think that if they are going to move to a two-tiered pay scale and make other sacrifices that Chrysler should be willing to put more on the table.

The unspoken resistance to the Chrysler deal may be that, backed by big hedge fund money, the union believes that this is the time to get concessions, while the owners are new and don’t to pay for a prolonged strike.

The big loser, if the deal is voted down, is Ford (F). Now that GM (GM) has a contract to its liking, it can move ahead with lower annual labor costs. GM has also shown that its cars are selling better with two strong months of results behind it. Ford’s sales in the last two months have run down almost 20%.

Ford is certainly in worse shape than GM is in terms of costs, new products, and sales. Chrysler has backers that can afford to keep the company going, even during a strike, if they choose to. If Ford cannot come to a reasonable deal with workers because the UAW has successfully bullied Chrysler, the company could face a cost disadvantage that it is in no shape to bear.

Douglas A. McIntyre