DETROIT/WASHINGTON, Oct 12 (Portal) – A senior Ford executive said on Thursday the automaker was “at the limit” of what it could spend on higher wages and benefits for the United Auto Workers and warned of a strike the union in the most profitable areas of the company The factory could harm workers and reduce profits.
“We’ve made it very clear that we’re at the limit,” Kumar Galhotra, head of Ford’s internal combustion vehicle division, said during a conference call Thursday. “We have put a lot of effort into getting to this point. If we go any further it will impact our ability to invest in the company.”
Ford is willing to reallocate money under its current offer in further negotiations with the union to reach an agreement, Galhotra said. Ford is also working with the UAW on a way to include workers at joint-venture electric vehicle battery plants in the UAW-Ford agreement, he said.
UAW President Shawn Fain ordered a strike at Ford’s truck factory in Kentucky on Wednesday after Ford negotiators failed to provide a more comprehensive contract proposal.
UAW negotiators on Thursday turned their attention to talks with Chrysler parent Stellantis (STLAM.MI), union President Shawn Fain said, confirming a Portal report.
“We hope the conversations at Stellantis today are more productive than they were at Ford yesterday,” Fain wrote on social media. Stellantis did not immediately comment.
The standoff between the UAW and Ford could soon affect thousands of workers who are not among the nearly 34,000 Detroit Three workers Fain has ordered to walk off the job since Sept. 15.
About 4,600 Ford workers could remain unemployed because their jobs depend on Kentucky Truck’s production of Super Duty pickups and large Lincoln and Ford SUVs, said Bryce Currie, Ford vice president of manufacturing.
Already, 13,000 workers at Ford suppliers have been furloughed because of previous UAW strikes at two Ford assembly plants, said Ford supply chain chief Liz Door. The closure of Kentucky Truck, Ford’s largest factory, could cause a fragile supply chain to “collapse,” she said.
Fain and other UAW officials have countered that Ford, General Motors and Stellantis can afford to raise wages for UAW workers beyond the 20% to 23% they offer, the lower pay scales for lower-senior workers and temporary workers to abolish and restore lost defined benefit pensions in 2007 if they curb share buybacks and cut excessive executive pay.
SHARP ESCALATION
The Kentucky Truck strike was a sharp escalation in the UAW’s slow-moving strike campaign and was a warning to Stellantis and General Motors (GM.N), whose pay and benefits lag behind Ford’s, automaker summaries show UAW have published.
Fain has scheduled a video address for Friday at 10 a.m. EDT (1400 GMT). In recent weeks, Fain has used Friday addresses to order further work stoppages or to announce progress in negotiations.
Fain has not yet commented on what action, if any, he will take on Friday.
Some analysts viewed Fain’s decision to close the Ford truck plant in Kentucky, which makes Super Duty pickups and Lincoln Navigator SUVs, as a sign that the end game is near in the nearly month-long round of coordinated strikes at the Detroit Three could begin.
“Pressure was always needed to force a deal,” Evercore ISI analyst Chris McNally wrote in a note Thursday.
White House press secretary Karine Jean-Pierre said the administration was closely monitoring the economic impact of the widening strike and still hoped both sides would reach a “win-win agreement.”
Last Friday, Fain said that if necessary, the UAW would strike GM’s Arlington, Texas, assembly plant, which builds the Cadillac Escalade, Chevy Suburban and other large, high-priced SUVs. GM’s heavy-duty truck assembly plant in Flint, Michigan, is another potential target.
Stellantis’ high-yield targets include the automaker’s Ram pickup truck factories in Sterling Heights and Warren, Michigan, and two Jeep SUV factories in Detroit.
“This puts everyone on notice,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “If they haven’t brought anything new to the table since last week, GM and Stellantis should be concerned.”
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Analysts at Wells Fargo estimate Ford will lose about $150 million a week in core profit as a result of the Kentucky plant strike.
Ford officials said Thursday that striking a deal that doesn’t allow the company to survive makes no sense and that a strike at its truck plant in Kentucky would also hurt the UAW’s profit-sharing checks.
In a sign of the strike’s growing impact, Delta Air Lines (DAL.N) said Thursday that it is feeling the strain from strikes in the automotive and entertainment industries. Delta President Glen Hauenstein said the UAW strike resulted in a “significant” decline in business in Detroit.
Automakers have more than doubled initial wage hike offers, agreeing to raise wages in line with inflation and improving wages for temporary workers. However, the union continues to demand higher wages, the abolition of a two-tier wage system and the expansion of unions to battery factories.
The UAW has room to expand its strikes and increase pressure on the Detroit Three to offer bigger wage increases, richer pension packages and more assurances that new electric vehicle battery plants will be unionized.
Although 8,700 workers are currently on strike at the Ford truck plant in Kentucky, less than a quarter of the 150,000 UAW workers at the Detroit Three automakers are on strike. However, thousands more jobs were laid off at plants that weren’t striking because automakers said the work stoppages made their work unnecessary.
Ford said Thursday that there have already been 13,000 layoffs among its suppliers and that 4,600 of its own workers at other plants could be laid off.
Ford warned that workers at a dozen other factories could be sent home because of the truck plant strike. Officials said new layoffs due to the Kentucky strike could begin in the coming days.
The Kentucky truck plant, the company’s most profitable operation, generates $25 billion in annual sales, about one-sixth of Ford’s global automobile sales.
Fain and other UAW officials called a meeting with Ford Wednesday evening and demanded a new offer, which Ford did not have, a Ford official said.
“They just lost Kentucky Truck,” Fain said, according to the Ford official and a union source, speaking on condition of anonymity because the conversations are not public.
Ford said the decision was “grossly irresponsible.”
Fain said his goal is to unbalance automakers through targeted measures rather than an all-out strike.
Detroit automakers are scheduled to report third-quarter financial results between Oct. 24 and Oct. 31, and the UAW could use expected robust earnings to lobby for a larger contract.
Before Ford’s announcement on Wednesday, the union had ordered strikes at five assembly plants, including two Ford assembly plants, at the three companies and 38 GM and Stellantis parts depots.
Reporting by Joe White in Detroit, Abhirup Roy in San Francisco and David Shepardson in Washington. Additional reporting by Priyamvada C in Bengaluru. Editing by Peter Henderson, Ben Klayman, Nick Zieminski and Matthew Lewis
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