US vehicle union and Ford reach tentative deal to end prolonged strike

The United Auto Workers (UAW) union reached a tentative labour deal on Wednesday with Ford Motor, the first of Detroit's Big Three car manufacturers to negotiate a settlement to strikes joined by 45,000 workers since mid-September.

The proposed accord, which UAW's leadership must still approve, provides a 25% wage hike over the four-and-a-half-year contract, starting with an initial increase of 11%.

The Ford deal, which could help create a template for settlements of parallel UAW strikes against GM and Chrysler parent Stellantis, would amount to total pay hikes of more than 33% when compounding and cost-of-living mechanisms are factored in, the UAW said.

“We told Ford to pony up and they did,” UAW president Shawn Fain said in a video post on Facebook, adding that the strike at Ford “has delivered”.

In addition to the general wage hike, Fain said the lowest-paid temporary workers would see raises of more than 150% over the contract term and employees would reach top pay after three years. The union also won the right to strike over future plant closures, he said.

The UAW also succeeded in eliminating lower-pay tiers for workers in certain parts operations at Ford — an issue Fain highlighted from the start of the bargaining process, wearing T-shirts with the slogan “End Tiers.”

The Ford contract would reverse concessions the union agreed to in a series of contracts since 2007, when GM and the former Chrysler were skidding towards bankruptcy, and Ford was mortgaging assets to stay afloat.

“We know it breaks records,” Fain said in a video address on Wednesday night. “We know it will change lives. But what happens next is up to you all.”

The Detroit vehicle makers have argued that the UAW's demands will significantly raise costs and hobble their electric vehicle (EV) ambitions, putting them at a disadvantage when compared to EV leader Tesla and foreign brands such as Toyota Motor, which are non-unionised.

The UAW was preparing to strike at a key Ford facility in Dearborn this week if it had not reached agreement after striking at additional GM and Stellantis facilities this week.

But in an unexpected move that adds pressure on GM and Stellantis, the UAW told Ford workers now on strike to return to their jobs during the ratification process. That means production of Ford Super Duty pickups, Ford Bronco and Explorer SUVs and Ranger trucks could restart this week.

Ford, confirmed the news. “We are pleased to have reached a tentative agreement on a new labour contract with the UAW covering our US operations,” Ford CEO and president Jim Farley said in a statement. Ford shares rose 2% in after-hours trade.

In statements, GM and Stellantis said on Wednesday they were working to secure agreements as soon as possible.

“This lays the groundwork for the next two contracts and they should fall in line fairly quickly because all three were within a narrow gap of each other,” said Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions.

The UAW ratcheted up pressure on the vehicle makers by striking at each company's most profitable plant — GM's Arlington, Texas assembly plant, Ford’s Kentucky heavy-duty pickup factory and Stellantis’ Ram pickup plant in Sterling Heights, Michigan.

The total economic loss from the auto workers' strike has reached $9.3bn, the Anderson Economic Group said earlier this week.

“I think this will be a positive for the stocks,” said portfolio manager Tim Piechowski at ACR Alpine Capital Research, which has $250m in investment in GM. Detroit Three shares currently reflect a scenario worse than the terms of the tentative agreement, he said.

Bargaining table

The UAW's campaign for a record contract converged with union efforts in Hollywood and at delivery giant UPS to win big pay increases. It also became the focus of attention by US President Joe Biden and Republican rivals who see Michigan and other vehicle states as pivotal to their 2024 campaign strategies.

Biden joined Fain on a picket line in September, and praised the tentative agreement in a statement on Wednesday night as a “testament to the power of employers and employees coming together to work out their differences at the bargaining table.”

Absent from Fain and UAW-Ford vice-president Chuck Browning’s summary of the contract terms on Wednesday was mention of future pay and unionisation at new joint-venture EV battery factories the Detroit Three are building with Asian partners.

Because they are owned by separate corporate entities, the vehicle makers did not have to include those factories in this round of bargaining. Fain had pushed for assurances that battery plant wages would be comparable to wages at assembly plants, and expressed concern that UAW jobs at Detroit Three combustion powertrain plants would be lost over time to non-union battery operations.

Nonetheless, Harley Shaiken, labour professor at the University of California, Berkeley, saw the deal as one with far-reaching implications. “This is a set of negotiations, historically, where gains made in Detroit would be viewed and adapted by many other industries across the economy,” he said.

Former GM shareholder Jeffrey Scharf of Act Two Investors said the bottom line for union chief Fain depended on his ability to expand the union.

“If they can use this as a lever to organise Tesla and companies like that, he's brilliant. If they fail to organise the other companies and the differential causes jobs to go out of Detroit and to the other companies, then he's a failure,” Scharf said.

Reuters