Autoworkers strike expands again against GM and Ford

Ford's shift toward electric vehicles is not going to cost jobs, chief executive Jim Farley said in a livestreamed negotiations update Friday. Ford's upcoming EV battery factories had been a source of particular friction with workers, Farley said. Also, there have been broad concerns that electric vehicles, which have fewer parts to assemble than gasoline-engined vehicles, will require fewer workers.

But Farley insisted there will be more jobs, not fewer, at Ford in the future.

“None of our workers today are going to lose their jobs due to our battery plants during this contract period and even beyond the contract," he said. "In fact, for the foreseeable future we will have to hire more workers as some workers retire, in order to keep up with demand.”

Farley indicated, during the presentation, that Ford would produce affordable EVs. Ford will also continue producing gasoline-powered vehicles for the foreseeable future, Farley said, because there will be customers who need them.

In the past, Farley had indicated that electric vehicles would take 40% less labor to assemble, but he said those jobs could be made up for by bringing more jobs, such as component manufacturing, back into company.

United Auto Workers president Shawn Fain responded sharply to Ford executives' statements indicating serious progress in negotiations, especially on wages and benefits.

"We are making significant progress on the pay and benefit side," Bryce Currie, vice president of manufacturing in the Americas and of labor affairs at Ford said during the presentation. "I'm not going to share some of the specifics, but we’re close."

But Fain insisted that was overly optimistic, and that Ford CEO Jim Farley had already forewarned of cuts in the long-term.

"We are far apart on core economic proposals like retirement security and post-retirement healthcare, as well as job security in this EV transition, which Farley himself says is going to cut 40 percent of our members’ jobs," Fain said.

In the past, Farley has has said that electric vehicles will use 40% less labor to assemble, according to Reuters, but he added that Ford would bring in other types of work, such as components manufacturing, to make up for those lost jobs.

During Friday's Ford presentation, Farley quipped that Fain was on television "more than Jake at State Farm," while Ford was working hard to reach an a deal.

Fain claimed it was Ford that was not being conscientious. Ford has, so far, not responded to a "comprehensive proposal" that was presented Monday, Fain said.

"Like a good neighbor, we’re available 24/7," Fain said, using a phrase from the State Farm theme song, which was written by Barry Manilow in 1971. "Name the time and the place you want to settle a fair contract for our members, and we’ll be there."

While the United Auto Workers union expanded its strike at Ford Friday, executives at Ford said the two sides are getting relatively close to a deal on wages and benefits that would be affordable for the company and good for the 57,000 UAW members there.

"We are making significant progress on the pay and benefit side," said Bryce Currie, vice president of manufacturing in the Americas and of labor affairs at Ford. "I'm not going to share some of the specifics, but we’re close."

CEO Jim Farley and Currie both said they believe the sticking point on a deal is the union's demand about the pay at a plant under that will build EV batteries. Both said those battery plants will need to be competitive with lower-wage battery plants being built by competitors.

Ford had previously said that meeting the union's demands, including 40 percentage points in wage increases over the life of the contract and a four-day, 32-hour work week without a drop in pay from the current 40-hour week, would cause massive losses and bankruptcy. But they said that is no longer the case give the progress at the bargaining table.

"The deal that we’re close to is actually a deal that’s affordable to us, that allows us to continue investing where we need to invest," said Kumar Galhotra, president of Ford Blue, the unit of Ford that makes traditional gas-powered vehicles for consumers. "And it’s a very good deal for the workers."

But UAW President Shawn Fain attacked Farley and other Ford executives for characterizing the two sides as close on financial issues in the deal.

"We gave Ford a comprehensive proposal on Monday and still haven’t heard back," said Fain. "We are far apart on core economic proposals like retirement security and post-retirement healthcare, as well as job security in this EV transition,"

The split on "retirement security" isn't disputed by Ford, as its executives say they are not agreeing to a union demand to resume traditional pension plans for those hired since 2007.

Ford CFO John Lawler called those defined benefit plans that pay a guaranteed monthly benefit until a retiree dies, "a plan of the past."

Gasoline-powered vehicles will remain part Ford's vehicle portfolio for the foreseeable future, Ford CEO Jim Farley said during a media presentation Friday. The company still plans to introduce new electric vehicles but, for the time being, there will be customers for whom fully electric vehicles just aren't viable. And Ford plans to still offer products for those customers.

This is in contrast to rival General Motors, which has said it will produce only electric light duty trucks and passenger vehicles after 2035. Ford has set no such deadline, globally. (Ford has said it will go all-electric in Europe by 2030.)

Farley gave the example of someone pulling a large trailer through mountainous terrain, the sort of thing people use Ford's Super Duty pickups for. Currently, Ford offers an all-electric version of the F-150, a light duty pickup, but has not yet revealed an electric version of the bigger, more powerful Super Duty models. Electric vehicles lose substantial driving range when towing heavy loads.

Ford executives said in the past that gasoline-powered cars remain important to some customers for both practical and emotional reasons. For instance, while Ford has an electric SUV called the Mustang Mach-E, the traditional Ford Mustang coupe remains available only with gasoline engines even after a new redesign.

Ford reports earnings separately for its gasoline and hybrid vehicles division, Ford Blue, and for its EV division Ford Model E. Ford has been losing money, so far, in its electric vehicle division, but the Ford Blue division is highly profitable.

The UAW strike has made a substantial dent in Ford's bottom line, according Ford Blue President Kumar Galhotra, as workers at two key money-making plants have walked off the job. Ford Blue is the Ford unit that makes cars with traditional internal combustion engines.

The first plant the UAW struck produces the Ford Bronco, which Galhotra said tends to sell very well. The second assembly plant produces the Ford Explorer, another "important vehicle." That plant went on strike at noon ET today.

While he didn't go into the specifics, Galhotra did acknowledge that the automaker is losing "tens of millions of dollars" every week.

"If this continues week after week, of course it will have a substantial impact on our business," he added. "But we're ready for it… we want to get a deal and we want to get a fair deal for our employees."

While the UAW says it wants pensions restored, Ford CFO John Lawler said that for Ford's unionized workers, it's not going to happen.

"So when you look at the defined benefit plan they're asking for, you know, that's a plan of the past. Only 12% or so of Fortune 500 companies offer that today. What we're offering is a defined contribution plan where we contribute," Lawler said on a livestreamed negotiations update.

Defined benefit plans are more popularly known as pensions; defined contribution plans, in contrast, include things like 401(k)s.

Ford announced earlier this week that it was pausing work on a Michigan battery plant in which the automaker plans to invest $3.5 billion. Work will eventually resume work on that plant, Ford CEO Jim Farley said today, and it will make batteries for electric vehicles.

Ford needs to decide, though, how big that plant will ultimately be, something that depends on several factors. One of those factors is the outcome of these UAW labor negotiations, which will partly determine what sorts of vehicles Ford will produce that will use the batteries the factory makes.

Another factory is the final wording of Inflation Reduction Act rules that determine the amount of tax credits consumers will get when purchasing electric vehicles. In general, those rules favor vehicles with batteries manufactured in the US, but there are still techincal points to be worked out.

The Marshall, Michigan, battery plant has been the subject of political debate, also, because it will use technology from a Chinese company, CATL. Farley said that was not a factor in the decision to pause work on the plant, though.

"For Marshall, we’re not doing political math," Farley said.

Ford also has three other EV battery plants under construction. Two are in Kentucky and one nearby in Tennessee. Those are owned by a joint venture company operated by Ford and South Korea's SK Innovation and so are not part of these UAW negotiations, since they are operated by a separate company.

Ford CEO Jim Farley pleaded with the UAW to agree to terms in a livestream presentation Friday afternoon, noting his company's interdependence on its union members, while raising the specter of a loss of manufacturing jobs entirely.

"As this strike shows, we can't build vehicles in the US without the UAW, and whether [UAW President] Shawn Fain believes it or not, the UAW needs a healthy Ford, General Motors, and Stellantis, to have a future," he said.

He cited instances of countries losing their domestic auto industry entirely and said he was trying to avoid a similar situation in the United States.

With the UAW demanding wage increases of more than 30% -- and similar wage gains for unionized workers being won around America -- you'd think that would continue to boost the specter of inflation.

Some union critics have claimed that big pay raises would contribute even more to inflation, because companies would have to raise prices to make up for higher salaries.

Not so fast, Goldman Sachs economists say.

Instead, pay may be merely catching up to inflation, as unions renegotiate their contracts for the first time during the past couple years' inflation spiral.

Goldman Sachs, in a Thursday report, called union wage gains a "final echo of last year’s inflation surge."

"It is tempting to think that union workers are central to any wage-price feedback loop because they have more bargaining power. But we have shown that was not the case," the report said.

Goldman noted in similar inflation spirals during the 1960s and 70s, union gains also didn't contribute significantly to inflation. The economists also noted that the vast majority of Americans are not unionized, which will also temper the effect on overall inflation.