Workers at Ford's Dearborn Truck Plant are among the last to vote on a new four-year contract. Their votes, which will be cast through Friday, could determine the fate of the deal. Image source: Ford Motor Company.
What's happening: Ford's tentative new contract with the United Auto Workers (UAW) is in serious danger of being voted down by workers. Roughly 75% of eligible workers have voted, and more than half of the workers who have voted so far have voted against the agreement.
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A surprising turn against a rich-looking new contractAnalysts (including your humble Fool) expected the new contract to win approval without much trouble. It's a richer deal than the ones approved by workers at Fiat Chrysler and General Motors , and it appeared that UAW leaders and Ford executives had deftly defused the issues that raised objections at FCA and GM.
But while those UAW leaders have been pointing out the gains they won in increasingly strident tones, it doesn't appear that the workers are buying it. Workers appear to have expected substantially larger raises and bonuses, and those expectations -- fueled and reinforced by discussions on social media -- are leading workers to vote against the agreement.
But it seems unlikely that a return to the negotiating table will yield significant further gains. Ford had nothing to gain by holding back: It's fair to assume that the tentative contract includes the company's "last best offer".
The UAW's Jimmy Settles, who led the negotiations with Ford, warned in a news conference on Wednesday that if the contract is rejected, $9 billion in promised investments in Ford's U.S. factories could be in jeopardy. (Ford, as is the custom during negotiations with the union, has not commented on the contract or the voting. CFO Bob Shanks said on Thursday that the company would have more to say after workers approved a deal.)
What happens if this deal is rejected?It's genuinely unclear. The tentative contract includes hefty product commitments from Ford, as well as wage increases that match those made by Detroit rivals and bonuses that outdo them.
If the contract is rejected and the parties return to the negotiating table, the company is likely to balk at making more than token enhancements to workers' compensation. Ford's total hourly labor costs in the U.S. are already higher than most rivals'; executives are keenly aware that they are -- despite years of improvements -- still at a competitive disadvantage in the U.S.
But at the same time, the workers hold a trump card: A strike at a key Ford plant could get very expensive, very quickly.
The upshot: This is a tricky situation The simple summary is that Ford's workers seem to have unreasonably high expectations that Ford is very unlikely to be willing to meet. It's possible that Ford might agree to richer wages or bonuses in the short term (the four-year life of the new deal), while preparing to move more of its production out of the United States after the contract expires.
In other words, workers might find themselves getting more now -- only to see many of their jobs disappear next time around. We'll know more after the last workers vote on Friday.
The article Will Workers Reject Ford's New Labor Deal? originally appeared on Fool.com.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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