(Bloomberg) — The United Auto Workers reached a tentative labor agreement with Ford Motor Co., putting pressure on the carmaker’s two chief rivals to end a protracted strike that has cost the industry billions of dollars.
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Ford agreed to a record 25% hourly wage hike over the life of the contract, which exceeds four years. With cost-of-living allowances, the top wage rate is expected to increase by 33%. The top pay will be over $40 an hour, the union said.
UAW leadership will vote on the deal Oct. 29. It then must be ratified by Ford’s 57,000 US hourly workers, a process that could take weeks.
“We won things nobody thought was possible,” said UAW President Shawn Fain Wednesday night in a video posted on X. “Since the strike began, Ford put 50% more on the table.”
In a statement on Wednesday, President Joe Biden highlighted “worker power” when congratulating Ford and the union on reaching a deal.
Pay was one of the last issues to be ironed out during the talks. The union had originally sought a 40% raise and 32-hour work week before reining in its demands. Ford earlier agreed to cost-of-living allowances, converting temp hires to full-time and expediting how long it takes workers to get to the top wage rate.
Left out of Wednesday’s announcement were details on key issues including wages and benefits at battery plants and Fain’s initial demand for a 32-hour workweek.
Fain did not address whether the tentative agreement covers Ford’s four battery plants that are under construction or helps the UAW organize the new electric truck assembly plant the automaker is building in Tennessee.
General Motors Co. and Stellantis NV are set to meet with the UAW on Thursday and the union hopes they will agree to the same terms, according to people familiar with the talks who weren’t authorized to speak publicly.
The UAW told Ford workers to go back to work during the ratification process to “keep the pressure on Stellantis and GM,” said Chuck Browning, the union’s top Ford negotiator.
“The last thing they want is for Ford to get back to full capacity while they mess around and lag behind,” Browning said in the video.
GM and Stellantis said in separate emailed statements that they’re working with the UAW to reach agreements “as soon as possible.”
Ford said it was “pleased” to reach a deal with the UAW and restart its plants, “calling 20,000 Ford employees back to work and shipping our full lineup to our customers again,” the company said in a statement.
The strike that began Sept. 15 initially affected one vehicle-assembly plant at each of Detroit’s legacy automakers. It was the first time all three companies were targeted at once — a bet by Fain to keep them guessing about his next move. Within six weeks, the strike grew to include more than 45,000 workers at eight assembly plants and 38 parts-distribution facilities.
After the UAW launched a surprise walkout at Ford’s highly profitable Kentucky Truck Plant on Oct. 11, it announced that it was switching up its strategy to call strikes with little notice, which it said was a response to companies slow-walking talks before making any substantial offers.
Two more surprise strikes followed: at Stellantis’ Sterling Heights, Michigan, plant that makes its best-selling Ram 1500 pickup truck on Oct. 23; and GM’s Arlington, Texas, facility assembling the Chevy Tahoe, GMC Yukon and Cadillac Escalade on Oct. 24.
Fain suggested that a bigger strike was in store for Ford if it hadn’t reached an agreement.
“Ford knew what was coming on Wednesday if we didn’t get a deal. That was checkmate,” Fain said in the video on X.
The strike was estimated to cost GM, Ford and Stellantis about $2.1 billion in lost earnings before interest and taxes as of Oct. 23, according to Deutsche Bank analyst Emmanuel Rosner. GM this week pulled its earnings guidance after the strike muddied its outlook.
Shares of GM and Ford have seen steep declines since July and are underperforming the S&P 500 this year. Stellantis is an outlier with its US shares up 33% so far in 2023.
What Bloomberg Intelligence Says:
“Ford’s tentative labor agreement with the UAW may increase its costs by more than $900 million in its first year, based on an 11% raise in year one, putting additional pressure on the company’s efforts to enhance its mediocre profitability.”
— Joel Levington, BI Director of Credit Research
Ford’s UAW Deal May Cost $900 Million; S&P to Act? Credit React
Fain made a high-stakes bet that he could win back benefits forfeited during the financial crisis more than a decade ago. The union has about 147,000 members at the three automakers, and they’ve been eager to share in soaring corporate profits as car prices have surged in the four years since the last contract was signed.
If approved, the contract could be of historic proportions. A Bloomberg Law review of the last 10 contracts between the Big Three automakers and the UAW show that raises in that period never topped 3% in a single year. In fact, for 21 of the 36 years covered under these earlier contracts, workers received no annual wage increase at all.
The UAW strategy reflects a resurgence of labor activism in the US. Emboldened by tight labor markets and agitated by inflation and risks shouldered during the pandemic, unionized workers have notched a series of victories in the last year at prominent US companies, including Kaiser Permanente and United Parcel Service Inc.
“This agreement sets us on a new path to set things right at Ford, at the Big Three and across the auto industry,” Fain said.
–With assistance from Jennifer Jacobs, Robert Combs “Bob” and Anne Cronin.
(Updates with context throughout.)
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