The controversial UAW strike last fall has changed Ford Motor Co.'s relationship with the union to the point that it will “think carefully” about where it will make its future vehicles, a Ford executive said Thursday.
CEO Jim Farley said at the Wolfe Research Global Auto Conference in New York that the company has always prided itself on its relationship with the UAW, having avoided strikes since the 1970s.
But last year, Ford's highly profitable plant in Louisville, Kentucky, was the first truck plant shut down by the UAW with a strike. As the company considers switching from internal combustion to electric vehicles, Farley said, “We have to think carefully about our (manufacturing) footprint.”
Ford has decided to build all of its highly profitable large pickup trucks in the U.S., and it has the largest number of union members — 57,000 — of any Detroit automaker, Farley said. That came at a higher cost than competitors that went bankrupt and built truck factories in Mexico, he said. Ford thought it was “the right kind of cost,” Farley said.
“Our dependence on the UAW turned out to be that we were the first truck manufacturer to close,” Farley told the conference. “Our relationship has really changed. It was a watershed moment for the company. Does this have an impact on the business? Yes.”
In response to Farley's comments, union president Sean Fine said in a statement Thursday that Ford must continue to focus on building the best auto industry, not on the race to keep wages down.
“Ford probably doesn't need to move factories to find the cheapest labor on Earth,” he said. “Maybe it needs to recommit to American workers and find a CEO who cares about the future of this country's auto industry.”
Farley and Fine's statements indicate that the relationship between the union and the company has changed. The letter, and especially Fine's response, builds on previous public criticism between the two, including when CEO Bill Ford in October pleaded with the union to end the work stoppage. “If Ford wanted to become America's all-in-one auto company, it could pay wages and benefits to all Americans,” Fine responded.
“This kind of back-and-forth is not necessarily helpful,” said Marek Masters, a business professor at Wayne State University. “I don’t think it reinforces anything… There are a lot of ways an executive can announce that they have a lot of options and they have to think about it.” On a lot of things going forward in terms of making decisions. “And they don't have to stick a needle in the back of the UAW or do anything like that.”
In response to a question about Farley's comments, White House press secretary Karine Jean-Pierre said that President Joe Biden believes in manufacturing goods and creating jobs in the United States.
“We will do everything we can to make sure that continues,” she said.
Biden also believes workers have the right to collectively bargain for better wages and benefits like the UAW did, she said. “This is something the president will always talk about and stand up for,” she added. “You hear him say this all the time: Unions build the middle class, and he believes that.”
Last year, the UAW posted strong wage gains and other gains after a six-week strike at select plants run by Ford, General Motors Co. and Jeep maker Stellantis NV. Big factory workers won 27% raises on the contract that runs through April 2028, raising their top wage to about $42 an hour. In total, Ford said the new UAW contract is expected to cost $8.8 billion over the four-and-a-half years of the agreement.
High manufacturing costs are among the reasons Ford loses $7 billion a year in cost to competitors, Farley said. He told the conference Thursday that Ford is making progress in reducing those costs through cultural and structural changes at the company.
Ford expects to take on $2 billion in costs this year, and Farley said he believes reductions in manufacturing costs will “fully offset” the cost of the UAW contract. Ford said the contract will add $900 to the cost of the vehicle by the time it is in full effect.
Ford has shifted its electric vehicle strategy to focus on smaller, lower-priced electric vehicles and electric work vehicles such as full-size pickup trucks and pickup trucks, Farley said. Any electric vehicle larger than the small, all-wheel-drive Ford Escape “had better be a really practical or work vehicle.”
A small team within the company is working on developing the foundations for a smaller, less expensive electric vehicle, which Farley said would be profitable because of US federal tax credits of up to $7,500 per vehicle. He did not specify a time frame for the release of the small electric car, but he said that the next generation of Ford electric cars will come in 2025 through 2027.
His comments about the union raise questions about whether the new small electric vehicle will be manufactured in Mexico, which has lower labor costs. Vehicles manufactured in North America are still eligible for the US tax credit.
Farley also said he sees electric vehicle battery prices falling as competition increases. He said the company may use a common cylinder-shaped battery cell to boost purchasing and get better prices. He also said Ford might do so with another automaker.
Ford Model E, its electric vehicle unit, lost nearly $5 billion before taxes last year. Farley did not specify a break-even date, but said any new electric car the company makes should make money within 12 months of its release.
In November, CFO John Lawler noted that the agreement with the UAW allows the automaker to be able to rebalance its manufacturing lines, footprint and automation. The company sees opportunities in terms of material, warranty and structural costs as well.
“We need to do this by reducing the number of hours it takes to build a vehicle, simplifying designs and reducing complexity, as well as increasing efficiency in our factories, and that is what we are focusing on,” Lawler said.
In 2023, the company still posts net income of $4.3 billion, largely due to big profits from its Pro commercial vehicle unit and Ford Blue, its internal combustion division.
Farley said Ford and others will have difficulty competing for electric vehicles with Chinese automakers, which are likely to sell 10 million of them this year. That's a big reason why Ford is hiring management talent to focus on lean operations, he said.
He said Chinese automakers have gone from selling no electric cars in Europe two years ago to 10% of the market now.
He said the Seagull electric minivan produced by Chinese auto giant BYD has material costs of about $9,000, and it will likely cost the company another $2,000 to meet crash test standards, for a total cost of about $11,000. It has a range of about 150 miles in cold weather, “not a great vehicle, but pretty good.”
“The UAW strike was a huge wake-up call for Ford, and Farley must keep all options on the table to build out manufacturing in Mexico and other low-cost locations,” Daniel Ives, managing director of senior equity analysts at Wedbush Securities, said in a statement. “They are flooding the market, and that creates a big problem for Ford, GM, Tesla and others. 2024 is a big year, and the UAW strike was a big jolt to the electric vehicle strategy.”
In a statement after the conference, Ford added that it is “the No. 1 employer of UAW-represented autoworkers and the only automaker to have added thousands of UAW-represented jobs since 2007. We also continue to invest in our UAW-represented plants during one of our largest years of new product launches.” “Not at all in the U.S. — with the new F-150, Ranger, Explorer, Expedition, Lincoln Navigator and Lincoln Aviator all launching this year. As Jim said, we will continue to build a strong business with the right people, cost structure and manufacturing footprint.”
Ford shares closed up 2.4% at $12.52 in Thursday trading.
Detroit News writer Kalia Hall and Associated Press reporter Darlene Superville Contributed.
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