UAW and Ford Will Sign Deal; Strike at GM?

Barring a last-minute breakdown of their talks, Ford and the United Auto Workers will avoid a strike and sign a new contract this week in which the automobile company will likely agree not to eliminate any of the 104,000 union jobs in its U.S. factories during the next three years. Not one job, that is, even if car sales slow down or workers retire.

How can Ford agree to such a thing? Because of its own efficiency, for one thing. Ford throughout this decade has pursued tough but clear policies and is now the most efficient U.S. car company.

But also, Ford’s guarantee is not a giveaway. The UAW is giving flexibility in return--some elimination of work rules that hamper efficiency and a reduction in job classifications that narrowly specify an employee’s work.

And both the company’s efficiency and the union’s flexibility are a response to competition. Ford changed its approach to making cars in response to competition from Japanese auto makers--the company’s “Quality is Job 1” slogan reflects a no-reject production technique perfected by the Japanese.

The UAW, meanwhile, is willing to reduce job classifications because it, too, has competition in the form of Japanese companies producing cars in the United States--Honda in Ohio, Nissan in Tennessee and Toyota, building a plant of its own in Kentucky, and now in a joint venture with General Motors in Fremont, Calif.

Only one of those locations, Fremont, is unionized, and even there Toyota and the UAW have worked out a common sense approach that allows workers to do what is necessary rather than what it says in the job description manual. Japanese managements don’t put up with restrictions on work, reports analyst Maryann Keller of the investment firm Furman Selz Mager Dietz & Birney. Which may be one reason why Honda turns out 78 to 84 cars an hour in Japan, while the U.S. industry standard is 60 to 65 cars an hour.

So the 52-year-old auto workers union has to cut down on job classifications--which often number more than 90--because its policies are putting U.S. car makers at a competitive disadvantage.

Affordable Concession

However, job classifications did not arise out of some errant intent to throw a monkey wrench in the works. They arose out of fear of unemployment and a desire to multiply jobs by spreading the work. That’s why the UAW wants guarantees before reducing them.

So, it negotiated first with Ford, which--ironically--can afford to give guarantees today because it has already reduced its work force. Since 1979, Ford has closed 15 plants and cut total employment from 244,000 to 181,000 while following a long-range policy that foresaw today’s glut of automobiles--at least 30 different manufacturers now selling cars in the U.S. market.

Ford is standing out in that crowd--selling 3.4 million cars and trucks a year, making good profits and building up an extraordinary $9-billion store of cash in its balance sheet. If it built a new plant, it could probably sell more cars and trucks. But that is not its policy. It doesn’t want to expand in good times, and regret in bad. “We decided years ago to live with some shortage of our ability to get our full share in a peak year,” says Ford Chairman Donald Petersen.

So the company “expands capacity using the same plant,” said analyst Douglas Laughlin of Dean Witter Reynolds. He means that Ford finds ways to cut production time or reduce scrappage and get more output from the same bricks and mortar--an operating method favored, no coincidence, by Japanese auto makers.

Also, Ford works a lot of overtime, an important factor in the pending labor agreement because Ford need not fear a mild downturn in auto sales. It can simply reduce overtime without breaking the job guarantees.

What if the economy should go into a real recession? The UAW would sit down and renegotiate, as it did in the 1982 recession, when it took wage cuts despite an existing contract. The union, led for many years by Walter Reuther, didn’t earn its reputation for foresight lightly.

A final irony is that the UAW next goes into contract negotiations with General Motors, the antithesis of Ford in that it has not reduced its production capacity, is not enjoying brisk sales for its cars, and--overstaffed in office and factory--wants no part of job guarantees. Which means that there may yet be an auto industry strike this year.

But if there is, note that it will come not at the tough, efficient company--Ford--but at the inefficient, floundering one--GM. Poor management benefits nobody.