UAW boss backs Ford contract concessions

[Omaha Steve]

http://apnews.excite.com/article/20090225/D96ILLE00.html

Feb 25, 9:50 AM (ET)

By TOM KRISHER

DETROIT (AP) - United Auto Workers President Ron Gettelfinger urged union members to vote for contract concessions to Ford Motor Co. (F) (F), saying the automaker can't survive in the long term without major restructuring.

Gettelfinger said in a letter to 42,000 hourly Ford workers that the company lost $14.6 billion last year and is burning through $1 billion per month to stay in business because revenue has dropped so dramatically.

He recommends that members vote for concessions and points out that the union was able to preserve base pay, keep current health benefits and pensions and prevent further plant closures.

But the union has also agreed to give up cost of living pay raises and cash bonuses, and the company will offer another round of buyout and early retirement incentives to shed more workers.

Ford shares rose 4 cents to $2.04 in morning trading Wednesday.

On Tuesday, local union leaders were told that Ford would make buyout or early retirement offers to all 42,000 U.S. hourly workers. The union also agreed to take as equity 50 percent of the payments that Ford is required to make into a union-run trust fund that will take over retiree health care expenses starting next year.

FULL story at link.

[Earth Bound Misfit]

1. UAW: A Seat on Ford's Board?

In order to extricate itself from billions in health-care obligations, Ford may be forced to make the UAW its largest single shareholder
http://www.businessweek.com/bwdaily/dnflash/content/feb2009/db20090223_998165.htm?chan=top+news_top+news+index+-+temp_companies

Ford Motor (F) reached a tentative agreement, announced Monday, with the United Auto Workers to pay $6.6 billion in obligations to the union's health-care trust fund in stock. The agreement could pave the way for the union to become Ford's largest single shareholder.

The deal was struck with Ford ahead of similar current negotiations with General Motors (GM) and privately held Chrysler, which are both negotiating with the U.S. Treasury over continued taxpayer loans to the troubled automakers. GM and Chrysler are also trying to secure deals to reduce the face value of bonds. If they can't get concessions from the UAW and bond holders, GM and Chrysler risk being forced into bankruptcy court.

While it is common in some European countries for union officials to have board seats, it is practically unheard of in the U.S. Daimler-Benz (DAI), Volkswagen (VOWG), and BMW (BMWG), for example, all have a representative of organized labor on their supervisory boards. And the UAW, when Chrysler was owned by Daimler, had a board seat at the German automaker.

Staying Out of Bankruptcy

But the notion that the union would have such power in the boardroom would have struck generations of Detroit executives—not to mention labor leaders—as inconceivable. Yet while Ford has not applied for government loans from the Troubled Asset Relief Program (TARP), it is restructuring its debt obligations anyway in an attempt to lower costs further, preserve cash, and avoid government loans and bankruptcy court. In a recent interview with BusinessWeek, Ford CEO Alan Mulally said: "We will make sure in all of this that we don't end up being disadvantaged to our competitors."

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The Ford deal could act as a template for negotiations with GM and Chrysler—except for one hurdle. GM and Chrysler are negotiating with the union at the same time they are dealing with bond holders for concessions, and neither wants to give up more than the other, even with the prospect of Chapter 11 hanging over the company. Ford is not yet negotiating with its debt holders for a "haircut" on the company's debt, according to Ford officials. A haircut, also known as a "cram down," means those holding debt will accept a reduction on the face amount of the bonds. The U.S. Treasury is looking for bond holders to take 30¢ on the dollar for GM's and Chrysler's unsecured debt, while GM's bond holder committee has been fighting for 50¢.

UAW Ford's Biggest Shareholder?

While Ford's deal with the UAW shows Wall Street and Washington that it is making progress lowering its union costs, the company is hoping to exchange as little stock for its cash obligations as possible. Ford's stock is trading at all-time lows and closed on Feb. 23 at $1.73 per share. Its market value on Monday was just barely above $4 billion. (GM's was a distressing $1.1 billion.) By today's share price, Ford, if it availed itself of the maximum terms of the deal, would pay more to the UAW in stock than all of the company's shares are worth today. "We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," said Ford spokesman Mark Truby in a written statement.

The UAW could become Ford's biggest single shareholder, thus giving the union the right to demand a seat on Ford's board. Ford officials and the UAW have not said yet if a board seat will be part of the settlement.

Ford has two classes of stock. The Ford family controls 40% of the voting shares of the company through Class B shares, which only family members hold. William C. Ford Jr., the great-grandson of founder Henry Ford, is the executive chairman of the company.

But it could be an interesting experiment. If the UAW does get a board seat, for the first time ever at Ford, the best interests of both management and labor would be truly aligned.