Ford ‘Careful’ About Manufacturing in United States Post UAW Strike

Ford Motor Company's electric F-150 Lightning on the production line at their Rouge Electric Vehicle Center in Dearborn, Mich., on Sept. 8, 2022. Jeff Kowalsky/AFP via Getty Images

Ford CEO Jim Farley suggested the company may have to rethink its “manufacturing footprint” in the United States after last year’s conflict with a worker’s union.

Speaking at the Wolfe Research Global Auto Conference in New York on Thursday, Mr. Farley said that Ford always took pride in its relationship with United Auto Workers (UAW), according to the Associated Press. Since the 1970s, the company has not experienced any strikes involving the union. However, this relationship changed last year when Ford’s Louisville factory in Kentucky was shut down by the UAW. As the company seeks to transition to electric vehicles from internal combustion engine ones, “we have to think carefully about our (manufacturing) footprint.”

UAW’s six-week strike last year forced Ford to negotiate higher wages for workers. Higher-level employees were able to secure a 33 percent wage hike running through 2028 that pushes their hourly wages to around $42. Ford also agreed to eliminate “divisive” wage tiers and reinstate cost-of-living adjustments.

“I want to be clear: We told Ford to pony up, and they did … We won things nobody thought was possible,” UAW president Shawn Fain said at the time. The new arrangement offered more raises to workers than the past 22 years combined, the union stated.

Mr. Farley said that Ford could cut down manufacturing costs this year to offset the cost of the new contract signed with UAW workers. The contracts would also add $900 in costs to a vehicle.

He pointed out that Ford’s decision to stick to manufacturing big pickup trucks in the United States has come at a higher cost than competitors, many of whom went on to build factories in Mexico. For long, Ford considered it the “right kind of cost,” he said.

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

During the UAW strike last year, Ford executive chairman Bill Ford warned that pushing up labor costs restricts investments in new factories and spending on new vehicle development.

“It’s the absolute lifeblood of our company. And if we lose it, we will lose to the competition. America loses. Many jobs will be lost,” he said in a speech in October.

Mr. Ford pointed out that the company builds more vehicles in the United States and has more UAW employees than any other firm. “Many of our competitors moved jobs to Mexico as we added jobs here in the U.S.,” he said.

Ford and EVs

During the conference, Mr. Farley also outlined Ford’s plans for EVs. The company has moved its focus towards smaller and lower-priced vehicles like pickup trucks and full-size vans in the segment, he said.

Currently, a team is developing the foundation of such a low-cost, small EV, which Mr. Farley claims will be profitable due to tax credits offered by the U.S. government.

Consumers who buy EVs are qualified for up to $7,500 in credits. However, only electric vehicles with final assembly done in North America are qualified for the credit. According to the U.S. Department of Energy, North America includes the United States, Canada, Puerto Rico, and Mexico.

This means that if Ford were to manufacture EVs in Mexico and sell them in the United States, the vehicles would still qualify for the credit.

Under the circumstance where Mr. Farley expressed dissatisfaction with the UAW strike, this could act as an added incentive for Ford to consider moving some of its operations into Mexico where labor costs are cheaper.

Two factors contribute to pressure on Ford to make its EV business profitable as soon as possible. Its EV segment is already in the red, registering an almost $5 billion loss before taxes last year. Mr. Farley indicated that any new EV from the company must become profitable within a year of its release.

Another reason is competition from China. In a recent interview with Bloomberg, Marin Gjaja, chief operating officer of Ford’s EV unit, said that the Chinese are “ahead of us in this technology.”

“We look at that and say, ‘That’s coming here eventually, so we’d better get fit now and better get going on EVs or we don’t have a future as a company.’”

During a panel discussion in Detroit, he said that Chinese automakers may seek to establish factories in Mexico in a bid to avoid the 27.5 percent tariffs that the United States imposes on China-made electric vehicles.

Citing media reports, Mr. Gjaja said that Chinese EV manufacturer BYD is already looking at factory sites in Mexico.

“If I was sitting in China right now running a Chinese OEM, I’d be looking for land in Mexico because you’ve got a supplier base, low cost of construction, low cost of labor, and the USMCA [trade agreement] that gives you access to the U.S.,” he said.

“They’re going to come here, just as the Japanese ended up here, the Koreans ended up here and the Germans ended up here. It’s a big market.”