Here’s Why Ford is at a Disadvantage in Union Negotiations
Unlike Chrysler Group LLC and General Motors (NYSE:GM), Ford (NYSE:F) is the only one of the Detroit trio to survive the financial crisis without the help of a government bailout. But as the automakers enter into negotiations with the United Auto Workers union this week, Ford will be at a disadvantage.
Though yesterday’s earnings report was better than expected, with revenue up from $31.3 billion to $35.5 billion, Ford’s profit fell from $2.6 billion to $2.4 billion. While the Dow Jones Auto Manufacturers Index has risen 10% in the last year, Ford’s performance has been flat, and the automaker’s share price has fallen 4.17% within less than a day of its earnings report.
Now Ford (NYSE:F) faces the possibility of a work stoppage if labor negotiations aren’t successful, something its rivals don’t have to worry about. As part of their bailout agreements, workers at both Chrysler and GM (NYSE:GM) had to agree not to strike this year. While Chief Executive Alan Mulally is confident that Ford will be able to able to come to an agreement with the union, its declining profits, and the expectation higher costs in the second half of the year, Ford is likely to look for savings in the form of labor costs. However, poor second quarter earnings could prove advantageous in negotiations by lowering the UAW’s salary expectations.