Ford Union Members Reject New Contract

This news is a month old and it's bothered us the whole time. At some level, how can this possibly surprise us?

Ford union members reject a contract that would have put their compensation inline with GM and Chrysler. The article begins with the following:

Autoworkers in Missouri and Michigan overwhelmingly rejected a new contract with Ford Motor Co., a sign that the automaker and the United Auto Workers union are having trouble convincing some workers to accept changes that would lower Ford's labor costs.

Think about this from the UAW's perspective: if you agree to Ford's demands, you end up with lower wages but Ford stays viable and value accrues to equity and debt holders. Instead, if you reject Ford's demands, one of the two following scenarios plays out:

1) You maintain higher wages yet somehow Ford remains solvent. This is better for you than agreeing to Ford's demands;

2) Ford goes bankrupt. You observe that in the Chrysler Traveschammockery the UAW ended up taking the lower pay but also owning 55% of the post-reorg equity and in GM's case the UAW ended up taking the lower wages and owning at least 17.5% of post-reorg equity. You easily assume that if Ford goes bankrupt, you'll then take lower wages and own 20% - 55% of post-reorg Ford equity. This is better for you than agreeing to Ford's demands today.

So Ford's reward for being the best managed of the Big Three? Emasculation. Ford's entire cost structure has been co-opted by the reality of the UAW's preferred position in The Administration. The unintended consequences of the government's disgusting actions continue to compound...