Ford CEO Warns Company Considering Shifting Manufacturing After Major Strike

On Feb 15, Ford CEO Jim Farley warned that last year’s strike has made executives reconsider where they will build vehicles in the future. The company is currently shifting its focus to electric vehicles.

Stark warning

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According to Farley, Ford will “think carefully” about where it decides to build vehicles in the future, due in large part to a historic strike by members of United Auto Workers last fall.

Veiled threat

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“We have to think carefully about our [manufacturing] footprint,” Farley said. He explained that the company was currently looking at transitioning from internal combustion vehicles to electric vehicles.

Extra costs

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According to Farley, Ford spends more on manufacturing than competitors, in part due to its decision to build many vehicles in the US, where many of its workers are unionized. Other companies have outsourced construction to countries like Mexico, cutting thousands of jobs in the US.

Major problem

“Our reliance on UAW,” Farley said, “turned out to be: We were the first truck plant to be shut down. Really, our relationship has changed. It’s been a watershed moment for the company. Does this have a business impact? Yes.”

The reality

UAW workers didn’t just strike against Ford in September; they targeted Ford, GM, and Stellantis after all three major automakers allowed the union’s contract to expire.

Who really won

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In the decade leading up to the strike, the “Big Three” automakers collectively raked in almost 250 billion dollars in profits in North America alone. In the first six months of 2023, they took home $21 billion.

Different fortunes

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Shareholders and executives were rewarded with multi-million dollar salaries. In 2022, the CEO of GM earned $29 million, and the CEO of Stellantis earned almost $25 million.

Meanwhile…

On the other hand, the real wages of the workers constructing the cars fell by almost a third in the two decades before the strike. According to In These Times, previous union leaders allowed automakers to extract numerous concessions that further worsened the position of workers.

What’s fair

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“You cannot make $21 billion in profits in half a year and expect members to take a mediocre contract,” the new UAW president, Shawn Fain, said at the start of the strike. “Our campaign slogan is simple: record profits mean record contracts.”

Extracting concessions

After several weeks, Ford was the first of the “Big Three” to reach an agreement with striking UAW workers. The union won a number of significant concessions, including major wage increases, the restoration of removed benefits, and more protections for temporary workers who traditionally were the most exploited workers in factories.Attempting to scale back

Despite making significant profits over the last decade, Farley explained that Ford was working to cut billions of dollars from its costs. He estimated that the company would save about $2 billion from what Yahoo Finance described as “cultural and structural changes at the company.” He did not confirm whether that included cutting executive pay.

Bringing in outsiders

Farley also noted that Ford has recruited new management to make the company’s operations leaner. He pointed to the recent success of Chinese automakers, who have made significant inroads in the European market.

Gaining ground

According to Farley, Chinese automakers have gone from selling no electric vehicles in Europe just two years ago to controlling 10% of the market today. He gave one example, BYD’s Seagull vehicle, which he thought cost the company about $11,000 to produce and was a “pretty d…mn good” vehicle.