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Lazer soldering at Ford’s plant in Oakville, Ontario. Hourly workers at the factory have a new employment contract.
Thanks to Ford
Employment contracts in the automotive industry are possible. A deal between the United Auto Workers and the Detroit-Three automakers could be closer than investors expect. Just look to the north.
Ford engine
(ticker: F) announced On Sunday, Unifor, the union representing some of its Canadian workers, ratified a three-year labor agreement that negotiators agreed to on September 19. The agreement includes a C$10,000 signing bonus for full-time employees and 15% salary increases over the life of the contract.
That amounts to an average of about 4.8% per year. It appears that there are additional cost-of-living adjustments beyond the 15% figure. The press release includes a mention of “significant inflation protection.” Ford did not immediately respond to a request for clarification from Barron’s, but a cost-of-living adjustment plus an increase in base pay could easily bring the average annual increase to between 5% and 6%.
“Our Unifor-represented autoworkers are the heart of Ford of Canada,” said Bev Goodman, CEO of Ford of Canada, in a news release. “This contract invests in our talented and dedicated employees… together we will ensure our Canadian operations continue to perform with the skills, knowledge and processes to compete and win.”
Now Ford, along with
General engines
(GM) and
Stellantis
(STLA), must enter into a new labor agreement with the United Auto Workers union. The UAW expanded its strike against the three automakers on Friday. Employees at GM and
Stellantis
parts and distribution facilities ran out, adding about 6,000 to the picket lines that were already some 13,000 strong.
UAW workers have struck at Ford’s Detroit Manufacturing Complex, but the UAW has not struck at additional Ford facilities, citing progress made in negotiations.
“Ford appears to be close to a settlement and was unaffected by the latest UAW actions,” Benchmark analyst Mike Ward wrote in a report Monday.
The Unifor negotiations remained under the radar for most investors. The negotiations seemed less controversial at first glance. In the U.S. negotiations, UAW President Shawn Fain has literally destroyed automakers’ proposals, while the auto companies have hit back at what they have characterized as union-provided disinformation.
The Canadian deal offers some hope and could show that an American deal is not that far away. The 15% figure with inflation protection is close to what automakers offer American workers. There is, of course, no guarantee that the UAW will settle for what a Canadian union will get. The UAW initially asked for wage increases of more than 40% with shorter hours.
Nothing seems threatening. U.S. “negotiations continue,” Ford said in an emailed statement on Sunday. “While we are making progress in some areas, we still need to close significant gaps on key economic issues. Ultimately, the issues are interconnected and must work together within an overall agreement that supports our mutual success.”
The UAW has been on strike for about ten days. The UAW struck against GM for 40 days in 2019.
Ford shares fell 0.3%, while the
S&P500
And
Dow Jones Industrial Average
fell by 0.1% and 0.2% respectively. GM shares fell 0.6% and Stellantis shares fell 1.8%.
In Monday trading, Ford and GM shares are down about 17% and 15%, respectively, since early July, when labor rhetoric began to heat up. The S&P 500 is down about 3% over the same period.
Stellantis shares are up about 10%. Stellantis is a more global company than GM or Ford. It is also a cheaper stock. Stellantis shares trade for less than four times estimated 2024 earnings. Ford shares trade for less than seven times. GM is trading for less than 5.
Write to Al Root at [email protected]
