Special Report

UAW logo2007 UAW
Labor Talks

YPSILANTI, MI – In a dire preview of this fall’s Big Three labor talks, an influential auto industry analyst says Ford Motor Co. may seek as much as 20% in pay and health-care concessions this summer.

Sean McAlinden, vice president of the Center for Automotive Research (CAR), tells attendees at an industry forum here Tuesday that sources say concessions could range between 5%-20%.

If the United Auto Workers union ultimately accepts Ford’s terms, the auto maker could save as much as $1.4 billion a year in labor costs, he says.

“We’re really worried about Ford,” McAlinden adds. “Ford is going to start burning cash at maybe twice the (current) rate.”

The auto maker already has mortgaged multiple assets, including lending-unit Ford Motor Credit Co., in raising $23.4 billion to fund its North American turnaround efforts through 2010.

But it has yet to announce seven future U.S. plant closings under its accelerated Way Forward plan, which already has seen 38,000 employees accept buyouts. Those are “seven hammers” that will force workers to accept big concessions, McAlinden says.

General Motors Corp. had shed 34,410 hourly workers through January, with about 80,000 remaining in the U.S. Chrysler Group’s restructuring will be far smaller than GM’s or Ford’s, with about 9,000 hourly workers in the U.S. and 2,000 in Canada to be offered severance packages.

“GM will be the size of Ford in capacity for North America; Ford will be the size of Chrysler; and we don’t know where Chrysler will be,” McAlinden says.

Industry rumors continue to swirl over whether GM may be interested in buying the struggling Chrysler from its German parent. Neither GM nor Chrysler are commenting about a potential merger or large-scale product alliance.

However, McAlinden expects GM to launch another major round of worker cuts in the near future. And if it does, he sees an opportunity for a major linkup with Chrysler, also desperate to reduce health-care costs.

“If GM runs another general attrition program, they could make room for more Chrysler workers,” he says.

Global product-sourcing decisions will be another critical bargaining point in the upcoming labor negotiations, he says.

For example, GM’s new Saturn Astra and upcoming Pontiac G8 unveiled at the recent Chicago auto show are rebadged imports built in Belgium and Australia, respectively.

GM has said it eventually would like to manufacture the models in the U.S. but has not specified where, even though some of its North American plants no longer will have product to build by spring.

“GM has never made money on a small car,” McAlinden says. “That’s really the point here. (UAW workers) really need a new contract.”