As Detroit automakers and labor leaders scramble to hammer out a contract that will shape the future of the US auto industry, former Ford CEO Mark Fields has words of caution for both sides.
Fields, who led Ford between 2014 and 2017, is warning the Big Three (the traditional name for legacy automakers Ford, GM and Stellantis) not to cave to labor demands in a way that leaves them in a precarious financial situation and at a competitive disadvantage, even as the workers who build the cars eye their healthy profits.
“The automakers can’t plead poverty,” Fields told CNN on Wednesday, noting the industry’s recent string of profitable years. “They will need to find a creative way to package a fair contract that rewards workers but do it in a way that doesn’t repeat the mistakes of the past.”
Fields noted that GM and Chrysler both declared bankruptcy in 2009 during the Great Recession.
The United Auto Workers union is seeking significant concessions from GM, Ford and Stellantis, initially pushing for a 40% pay hike over four years, restoring cost of living increases, bringing back traditional pension plans and restoring retiree health care coverage.
The UAW contract with the Big Three expires at 11:59 pm ET on Thursday.
If no deal is reached, a strike could begin at midnight on Friday. There has never been a simultaneous strike against all three major US automakers, which today make nearly half of all domestically-assembled cars.
Fields, who said he is not advising Ford CEO Jim Farley, told CNN the Big Three will “definitely” need to agree to pay hikes “well north” of previous increases. He pointed to the large-scale pay hikes recently won by unions, including at UPS, American Airlines and by West Coast dockworkers.
However, to avoid being left at a competitive disadvantage in an auto industry where consumers have many other choices, Fields urged the Big Three to push back against most non-wage demands from the UAW.
Asked by CNN’s Vanessa Yurkevich on Wednesday if the union’s demands are too ambitious, Ford’s current CEO said, “We’ll see.”
“We’re still optimistic that we’ll get a deal, but there is a limit,” Farley said, adding that his company made its most “generous offer in 80 years.”
Fields, the former Ford CEO, has a warning for the UAW as well: Be careful what you wish for.
He said that if the automakers are forced to reinstate pensions, provide healthcare for retirees and take other steps, they could decide to just move factories – and jobs – overseas.
“The automakers are going to be very rational about this. If this is what my cost per unit is here in the US — including labor — and it’s uncompetitive, I’m going to have to move it to where it’s more competitive, like Mexico,” said Fields, who is currently a senior advisor to private equity firm TPG Capital. “You don’t want the UAW to win the battle but lose the war.”
Ford’s plant in Chihuahua, Mexico, is also unionized, and its workers recently negotiated an 8.2% raise.
UAW President Shawn Fain argued in a CNN interview on Monday that a work stoppage would only hurt the “billionaire class.”
“In the last four years, the price of cars went up 30%. [Automakers’] CEO pay went up 40%. No one said a word. No one had any complaints about that but God forbid the workers ask for their fair share,” Fain told Jake Tapper.
Fields said he doesn’t take “much offense” to Fain’s comments, comparing him to a politician trying to strengthen his hand in negotiations.
“But I do think he’s quite misplaced in that if there’s a work stoppage… there will be lots of people hurt,” the former Ford CEO said.
Fields pointed to estimates that for every hourly auto worker, there are nine or 10 jobs supported elsewhere, from the supply chain of parts makers to local coffee shops and dry cleaners.
Bob Nardelli, who led Chrysler from August 2007 until he resigned in April 2009 when the company filed for bankruptcy, is similarly worried about the economic consequences of a strike.
“This could have a significant impact. It could tip us certainly into a very tough situation economically,” Nardelli told CNN in a phone interview on Tuesday.
However, economists say a UAW strike is unlikely to cause a recession, though it would do damage to local economies and parts suppliers.
According to Anderson Economic Group, a 10-day strike against the Big Three would cost the US economy $5 billion.
If all three faced a strike, shrinking auto production would cut quarterly annualized growth by 0.05 to 0.1 percentage points for each week it lasted, Goldman Sachs estimates. However, Goldman Sachs said growth would then rise by the same amount it declined in the quarter following a strike.
Beyond the impact to GDP, Nardeli worries about how rising wages will worsen the inflation situation and keep interest rates high.
“It’s not just the union workers doing a landgrab here. Everybody is rushing to get wage increases. You can’t fault them for trying to deal with inflation that is hurting their families,” the former Chrysler CEO said. “I don’t blame them. But unfortunately, this just adds to the inflation problem.”
The UAW has angrily disputed the idea that higher wages for its members would raise car prices, with some justification. Car prices have soared 30% over the life of the current UAW contract. Pandemic-related shortages of parts, especially computer chips, caused limited new vehicle inventories in the face of strong demand. Prices are similarly higher at both unionized and nonunion automakers, and the wages of UAW members hour wages rose only 6% during this period that saw car prices skyrocket to record levels.
Setting expectations and winning ratification
For his part, Fields expressed surprise at the “very unusual” tactics taken by Fain, the UAW’s powerful leader, including making public his “very aggressive” asks.
“Traditionally, the UAW has kept their demands close to the vest and it’s done behind closed doors. The risk is by sharing all these ideas about what could be won, they could be setting expectations unreasonably high,” Fields said.
That in turn could make it harder to win ratification among rank-and-file members on a deal that will ultimately include some level of compromise, he said.
Nardelli recalled the “wonderful relationship” he and other auto execs had with Ron Gettelfinger, who led the UAW during the Great Recession.
“Without Ron’s support, the three of us — Ford, GM and Chrysler — would not have been able to make it through that challenging period when the financial institutions melted down and took us with them,” Nardelli said.
By contrast, Fain ran to lead the UAW on a campaign that cast union leaders as too cozy with auto CEOs. He promised to take a more aggressive stance and ended up winning election by less than 500 votes.
In today’s standoff, the former Chrysler boss said there must be a “serious meeting of the minds” to avoid a strike.
“There has to be candid, sincere negotiations — as opposed to asking for the moon,” Nardelli said. “The clock is ticking.”
CNN’s Chris Isidore contributed to this report.
Read the full article here