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Rejection of Ford contract changes may haunt workers

November 3, 2009  


 The Ford UAW workers who — against the advice of their national leaders — voted to reject a labor agreement that would have made the automaker competitive with rivals General Motors and Chrysler are taking a chance on the long-term success of the firm — and thus on the future of their own jobs.

 Ford’s reports of profits in the second quarter and again Monday for the third quarter may have seemed to make contract concessions on labor costs and work rules a hard sell.

 Getting any further relief between now and 2011, when the firm’s contract expires, may be difficult with the firm’s own projection of full-year profitability in 2011.

 But the unhappy fact, for Ford, Metro Detroit and the entire state, is that Ford still isn’t out of the woods.

 It avoided the bankruptcy proceedings that engulfed GM and Chrysler only by extensive borrowing to sustain its operations. It is to the credit of Ford CEO Alan Mulally and his team that it anticipated the firm’s need for credit. But Ford’s self-reliance has costs as well as benefits.

 As a result of avoiding bankruptcy and a government bailout, it has garnered a good deal of public approval. It has gained market share this year in contrast with its rivals.

 Still, Ford, unlike GM and Chrysler, remains highly leveraged. As analysts have pointed out, its second-quarter profits stemmed primarily from its restructuring of some debt, reducing its interest costs. But it is still carrying about $27 billion in debt.

 The firm late Monday announced additional plans to restructure debt and improve its balance sheet. It had been facing a $10.7 billion credit line payment in late 2011.

 It said it would seek to extend it to 2013 in exchange for more favorable terms for lenders. The company also announced new debt and equity offerings.

 This will help. But as analyst Rebecca Lindland of HIS Global Insight told The News earlier, “The auto market is still 5 million units short of where it should be. Ford may be better off than GM and Chrysler, but it is hardly in good financial shape.”

 There is already talk in the firm that work on some Ford product lines could be transferred to less expensive factories out of the country.

 This show of labor intransigence could have a long-term negative effect on the fortunes of the company.

 Auto manufacturing requires long-term planning and thinking. The lead time in designing and producing vehicles is much longer than almost any other consumer good. And there is still more auto manufacturing capacity in the world than markets can absorb.

 This means that only the strongest and most efficient can survive.

 A labor agreement that makes a company less competitive than its rivals is not an example of the long-term thinking that keeps firms healthy and helps workers retain their jobs.


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