Ford's turnaround over the past five years has resulted in big profits and won its CEO — former Boeing executive Alan Mulally — a reputation for brilliant management.
DEARBORN, Mich. — Ford’s turnaround over the past five years has resulted in big profits and won its CEO — former Boeing Commercial Airplanes chief Alan Mulally — a reputation for brilliant management.
But those same achievements are stirring resentment among many Ford factory workers, complicating contract talks between the company and its union employees.
At The Rouge, Ford’s massive, 94-year-old factory complex in Dearborn, Mich., there’s talk along the assembly lines of winning back raises and bonuses lost when the company was near financial collapse in 2007.
Workers, who assemble F-150 pickups at the site, are upset that Ford is trying to cut labor costs, especially after nine straight profitable quarters and a $26.5 million pay package for Mulally.
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A few miles north, inside Ford’s 13-story headquarters known as the Glass House, executives are worried because workers, on average, cost the company $58 an hour in pay and benefits, the highest in the U.S. auto industry.
Differences between Ford and the union date to 2007, when all three Detroit automakers were on the verge of ruin. The previous year, Ford lost $12.6 billion, and U.S. sales were down 8 percent.
Worried that the company would collapse, Ford workers began a series of givebacks.
Like workers at General Motors and Chrysler, they eventually gave up cost-of-living pay raises, performance bonuses and other benefits. GM and Chrysler needed government bailouts and bankruptcy protection to stay in business, but Ford took billions in private loans and endured on its own.
As a result, Ford became a consumer favorite and the company prospered. It paid Mulally for engineering the turnaround and restored merit pay and some other benefits for white-collar workers, angering union members.
“The compensation for the CEO has been widely publicized, and those kinds of things wend their way up and down the assembly line,” says Harley Shaiken, a labor professor at the University of California, Berkeley. “It creates higher expectations.”
United Auto Workers President Bob King has said he’s not thinking about a strike. But he thinks workers should get a piece of the profits because they have each given up $7,000 to $30,000 a year in concessions since 2007. He also has called Mulally’s pay “outrageous.”
In a recent interview, Mulally defended his compensation, saying it was determined by the company’s success and the free market. He said much of his pay is “at risk” because it comes in stock that can rise and fall in price based on Ford’s performance.
Mulally’s salary is $1.4 million, with the rest coming in stock and a bonus.
The average hourly worker at Ford made $109,020 in 2010, including wages, benefits and overtime, up 17 percent from 1999. But the average salaried factory supervisor made $99,760 in wages and benefits, up just 2 percent in the same period, the records show.
Both sides are trying to find a compromise while work continues at Ford factories under a contract extension. A top union bargainer told workers on a telephone recording Monday night that talks are accelerating and he is “hopefully optimistic” a deal can be reached this week.
Ford’s profit and the possibility of a strike could force the company into a deal that’s more generous to workers than the one negotiated with GM, whose workers overwhelmingly approved a new four-year contract Wednesday that includes profit-sharing instead of raises and promises thousands of new jobs.
Chrysler, meanwhile, continues to negotiate its own contract with the union.
According to three people familiar with the talks, Ford is discussing adding as many as 10,000 jobs in the United States in negotiations. That subject is part of high-level negotiations between Ford and the UAW’s King and is still subject to change, said the people, who asked not to be identified.
As many as 4,000 of those jobs may come from Ford shifting production of the Fusion midsize sedan to the United States from Mexico, one of the people said.
“Jobs have been a central goal of the union in this round of negotiations,” said Shaiken. “Ford, which is the most advanced in its recovery, is a natural for this kind of job creation.”
General Motors agreed to add or retain 6,400 jobs in its contract with the UAW.
At Ford, bargainers are expected to use the deal with GM as a template. But it’s unclear if the provisions will be acceptable to Ford or its union workers. Although the GM deal has no pay raise for most workers, they would get a $5,000 bonus for ratifying the contract, more profit-sharing and higher pay for entry-level workers.
It’s the lack of raises that has rankled many of Ford’s 41,000 factory workers.
“Ford has to do a lot more,” says Gary Walkowicz, a worker at the Dearborn plant, the epicenter of union dissent.
Ford is the only Detroit automaker where the union can strike, something the company hasn’t seen since 1976. Walkouts over pay are banned this year at GM and Chrysler under the terms of their government bailouts.
Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass., says Ford can cut the risk of a strike if it doesn’t stray too far from the GM contract. But if Ford tries for big labor cost cuts, the odds of a strike rise to 50-50, he says.
Material from Bloomberg News is included in this report.