Ford Americas president Mark Fields shows off a new version of the Ford F-150 pickup, the company’s bestselling vehicle. Fields underestimated how quickly American consumers would abandon trucks and sport utility vehicles once gasoline prices began to rise.
A worker leaves Ford’s Wixom Assembly Plant in Michigan on January 23, 2006, after learning the factory would be shuttered as part of Mark Fields’ “Way Forward” restructuring plan. Wixom was one of fourteen plants in the United States and Canada that were marked for closure as part of the plan. The Detroit News Archives
Alan Mulally (left) and Bill Ford take questions from the media during a press conference on September 5, 2006. Ford had just informed the assembled reporters that he was stepping aside and giving the CEO’s job to Mulally. Ford would continue to serve as the company’s executive chairman.
Alan Mulally is mobbed by reporters from around the world at the North American International Auto Show in Detroit. From the moment he was hired, Ford’s new CEO found himself at the center of the media spotlight—a position he relished. The Detroit News Archives
The 1925 Ford ad that Alan Mulally turned to for inspiration. For Mulally, this summed up everything Ford stood for, and he was determined to return to the core values that had guided the company to its early success.
A salaried Ford employee cries as he leaves World Headquarters in Dearborn after being laid off on February 28, 2007. Alan Mulally had to cut even deeper in order to restore Ford to profitability. The Detroit News Archives
Heiress Elena Ford was more comfortable in Ford’s factories than in New York society. She would become a powerful advocate for the company inside the family, urging her relatives to give Alan Mulally the time he needed to turn the automaker around.
Don Leclair, Chief Financial Officer
Joe Laymon, Vice President of Human Resources and Labor Affairs
Mike Bannister, Chairman and CEO, Ford Credit
Derrick Kuzak, Vice President of Global Product Development
Bennie Fowler, Vice President of Global Quality
Jim Farley, Vice President of Global Marketing, Sales and Service
Ray Day, Vice President of Communications
Ziad Ojakli, Vice President, Government and Community Relations Quality
Tony Brown, Vice President of Global Purchasing
United Auto Workers president Ron Gettelfinger and Alan Mulally begin formal negotiations on a new national contract on July 23, 2007. The two men had actually been talking secretly for months. Ford’s lead negotiators, Martin Mulloy and Joe Hinrichs, are seated to Mulally’s left.
Ford executives hold one of their daily Special Attention Review (SAR) meetings in the Thunderbird Room at World Headquarters on December 1, 2008, during the depths of the crisis. Pictured (from left) are Ford Americas Controller Bob Shanks, President of the Americas Mark Fields, President and CEO Alan Mulally, Chief Financial Officer Lewis Booth, General Counsel David Leitch, and Vice President of Global Manufacturing and Labor Affairs Joe Hinrichs.
Alan Mulally and Bill Ford with the all-new 2012 Ford Focus, the car that would embody Mulally’s global “One Ford” vision for the company.
CHAPTER 11
Watershed
You’ve been fighting General Motors and the Wall Street crowd. Now you are in here, and we have given you a union shop and more than you got out of them. That puts you on our side doesn’t it? We fight General Motors and Wall Street together, eh?
—HENRY FORD to United Auto Workers leader Walter Reuther
For decades, Ford Motor Company had enjoyed a better relationship with the United Auto Workers than either General Motors or Chrysler. This was due largely to the mutual respect between the union and the Ford family, which was a bit ironic considering that their bond was baptized in blood.
Henry Ford’s $5-a-day wage may have made him the best friend the workingman ever had, but his relationship with his employees was always paternalistic. He cared about their welfare in the same way a kindly nobleman might have cared about his serfs. But he spurned their efforts to bargain with him on equal footing. Ford knew he treated his workers better than any other industrialist in the world, and he resented the idea that they might need a union to mediate with him on their behalf. He did everything in his power to block the early attempts to organize his factories in the 1930s. In 1932, Ford security guards and Dearborn police officers opened fire on workers demonstrating outside the River Rouge complex, killing four and wounding more than fifty. The passage of President Franklin Roosevelt’s National Industrial Recovery Act in 1933, which gave workers the right to collective bargaining, did little to change Ford’s mind.*
“Labor unions are the worst things that ever struck the earth,” Ford declared after the UAW used sit-down strikes to force GM and Chrysler to recognize the union. And he used Harry Bennett’s infamous Service Department, with its small army of thugs and spies, to keep them out of his factories even after the rest of the American automobile industry had capitulated. In 1937, Bennett’s goons attacked a UAW march led by Walter Reuther on an overpass leading to the Rouge factory—the same pedestrian bridge that had been the scene of the 1932 violence. Reuther and several others were badly beaten in what became known as “the Battle of the Overpass.” It turned public sentiment against Ford and brought growing pressure from Washington. After his workers managed to shut down the Rouge in 1941, Ford finally relented and signed his first contract with the UAW.
The adversarial relationship between Ford Motor Company and the UAW began to change at that moment. Henry Ford stunned Reuther by offering him more generous terms than the union had been seeking for its members. If Ford was going to be a union company, it was going to offer the best contract in the business.
Relations between the company and the UAW continued to improve under Henry Ford II, who remained remarkably at ease with the rank and file even as he became a role model for the international jet set. In the boom years after World War II, union workers prospered along with the company. Wages got richer and contracts got fatter as Detroit fell into the happy stupor of prosperity that carried it through the end of the 1960s. Labor agreements that were originally a few pages long morphed into thick tomes filled with arcane rules that governed every aspect of factory operations, from the division of labor to the time allowed for restroom breaks. Like the other Detroit automakers, Ford lost the ability to reassign workers and could not close plants without the UAW’s approval. Workers were eligible to retire with full pensions and benefits after just thirty years on the job, making it possible for some to earn more as retirees than they had on the assembly line. The companies also had to fund massive union bureaucracies that grew inside each factory to ensure the terms of these contracts were being followed to the letter. It was hard for the companies to complain too loudly. The union’s bureaucracies were inspired by those on the management side, often matching them person for person, while demands for ever-higher wages were a response to the mushrooming salaries of the automakers’ top executives. As Paul Ingrassia put it in his book Crash Course, “Detroit’s auto industry was built on corporate oligopoly and union monopoly—a combination that had produced decades of astounding success but also sowed the seeds of failure.”
When the Japanese invasion of the 1970s sent the automakers scrambling for cover, union bosses were unwilling to cede the gains they had made for their members over the past three decades. As Ford and the other manufacturers demanded concessions to keep their cars profitable, the UAW dug in its heels. The industry entered a new era of labor hostility. Quality began to erode as workers took out their frustrations on the assembly lines, and the automakers began sending more work to factories in Canada and Mexico—particularly after the North American Free Trade Agreement removed the barriers to trade with those countries in 1994.
Even in the face of this increasing animosity between the UAW and Detroit’s Big Three, Ford managed to maintain a better relationship with the union. Ford family members oft
en dealt directly with UAW officials, even during the period when there was no Ford in the chairman’s seat. None of the company’s factories had been struck since 1976. But even Ford could not get the concessions it needed to be competitive with the growing number of foreign transplants setting up factories of their own in the southern United States.
In 2002, Ron Gettelfinger was elected president of the UAW. Gettelfinger was a short, wiry, gravel-voiced man with a white mustache and an intense stare who carried himself with the air of a volcano about to erupt. A puritanical fighter for workers’ rights, he had grown up as one of a dozen children on a farm in rural Indiana. Gettelfinger crossed the state line to take a job at the Ford factory in Louisville, Kentucky, in 1964. At night he worked on his business degree at Indiana University Southeast in New Albany. Gettelfinger graduated in 1976 and began making his way up the union’s ranks. He was elected vice president in 1998 and became head of the UAW’s National Ford Department. Four years later, he became the head of the whole union.
Despite the often-confrontational relationship between the union and the American automakers, relations between company executives and UAW bosses had remained remarkably chummy behind the scenes. Ford, GM, and Chrysler spent big on golf outings, cigars, and booze to ensure the lines of communication remained open. Gettelfinger was the brother of a Catholic bishop and did not drink, smoke, or play golf. He put an end to all of this schmoozing when he took over at Solidarity House, the union’s international headquarters in downtown Detroit. For a while it seemed like things might go from bad to worse, at least as far as the companies were concerned. But Gettelfinger was also a pragmatist. He knew that the fate of the UAW and its members was inextricably tied to the fate of the Detroit automakers.
Bill Ford believed Gettelfinger was someone he could work with. The great-grandson of Henry Ford had spent a lot of time thinking about how to end the decades-long stalemate between his company and the UAW. He had studied labor history in college and was part of the company’s bargaining team in the 1982 contract talks that got the UAW to commit to making quality “Job One.” When Gettelfinger emerged as the heir apparent to confrontational UAW boss Stephen Yokich in 2001, Ford instructed Joe Laymon to start building a rapport with him. It was the sort of thing Laymon did best. During their first meeting, he offered to pass Gettelfinger confidential information about Ford’s competitive position and finances. He also offered to set up secret meetings between Gettelfinger and Bill Ford. During these sessions, Laymon urged Gettelfinger to raise any issues he might have with the automaker. When Gettelfinger did, Ford did his best to see that they were addressed. If lower-level managers lied to the UAW, Laymon told Gettelfinger the truth. Occasionally Ford would call in a favor. But not often. This was all about laying the foundation for a deal that would fundamentally alter the rules of the game in Detroit.
Laymon found himself sitting across the negotiating table from Gettelfinger in 2003, but the timing was wrong. The industry was still making too much money from its sport utility vehicles to demand meaningful concessions from the union. But that did not mean Ford had to wait until that contract expired in 2007.
In October 2005, Bill Ford promoted Joe Hinrichs to vice president in charge of North American vehicle operations, giving him responsibility for all of the company’s factories in the United States, Canada, and Mexico. Hinrichs was a young production executive who looked and sounded like a corporate version of Adam Sandler. Like Gettelfinger, he never drank, and he possessed a boundless energy that made him difficult to keep up with—even in conversation. At thirty-eight, Hinrichs was the youngest vice president in Dearborn, but he had already spent enough time in the automobile industry to develop a passionate aversion to the inefficiencies imposed on Ford and the other Detroit automakers by the UAW.
After earning a degree in electrical engineering from the University of Dayton in 1989, Hinrichs had signed on at General Motors. He did stints at a number of plants before being assigned to a joint-venture parts factory in Kentucky that GM had set up with Japan’s Akebono Brake Corporation. Like most Japanese-run factories, this plant had only two job classifications for hourly workers: production and maintenance. It was a model of efficiency compared to the American-run factories Hinrichs had worked in where the UAW contract established dozens of different job descriptions and prohibited the company from assigning workers tasks that were not specifically part of their description. He became so frustrated with GM’s inability to compete that he decided to get out of the automobile business and give private equity a try. Hinrichs became a partner at a Chicago firm that specialized in manufacturing companies, but returned to Detroit in 2000 as manager of Ford’s Van Dyke Transmission Plant. There he heard much about the cooperative relationship Ford was supposed to have with the UAW, but could discern no real benefit from it on the factory floor. There was no question that Ford avoided the nasty skirmishes that perennially plagued GM and Chrysler, but that did not make the Dearborn automaker any more competitive with the foreign transplants. When he was tapped to join Mark Fields’ Way Forward team, Hinrichs decided to challenge the UAW to make this so-called special relationship truly special.
Every spring, Ford hosted a meeting with local union leaders from around the country in Las Vegas. It was mostly about wining and dining on the company’s dime, but Hinrichs was determined to get a return on Ford’s investment when he headed for Sin City in March 2006. During a meeting with Ford’s plant managers and their UAW counterparts at the Paris Las Vegas hotel, he delivered a blunt analysis of Ford’s automotive operations in the United States. The company had too many employees in its U.S. factories—40,000 more than it needed to meet the current demand for its cars and trucks. Hundreds of these men and women were twiddling their thumbs in the company’s jobs bank. Thousands more were being paid assembly-line wages to clean the bathrooms, mop the floors, and mow the lawns. There was an unspoken rule at American automobile factories that, when a worker’s body started to pay the price for all those years of toil on the assembly line, he would be given a nice easy job pushing a broom or riding a mower until he was ready to retire. The problem was that many of these new assignments were so cushy that the workers who got them stayed on the job long after they were eligible to retire. This was work that any other company would have outsourced to low-wage contractors at a substantial savings. Hinrichs told the UAW leaders that this model was no longer sustainable. He also presented a series of slides comparing each of Ford’s U.S. factories with those of its principal competitors—Toyota, Honda, and GM—on the key metrics of quality, safety, and productivity. Hinrichs translated the productivity data for each plant into a dollar amount, showing the local union leaders just how much more Ford’s competitors were getting for their money. He also showed how this gap was forcing Ford to charge more for its cars and trucks and siphoning off cash that could be better spent elsewhere.
“If we had this money, we could be investing in new products—which you say you want for your plants,” Hinrichs told the labor leaders. “We could grow market share, which could boost employment. So, let’s start talking about how we fix this.”
There was a rush for the microphone. The first one to grab it was Mike Oblak, the chairman of UAW Local 900, which represented workers at Ford’s stamping plant in Wayne, Michigan.
“You don’t respect the UAW!” he shouted, accusing Hinrichs of youthful inexperience and an adherence to the adversarial labor practices he had learned while working at General Motors. “This is how GM thinks, not how Ford thinks.”
“The facts are the facts,” Hinrichs replied coolly. “We’re here to save the company, not appoint blame.”
Similar accusations followed from the next couple of speakers. But then something unexpected happened. First one UAW official, then another took the floor to thank Hinrichs for sharing this information with them. For years they had been listening to the company complain that its factories were becoming less and less competitive, but this was the first time
anybody had shown them the data that proved it.
“I think we need to talk about it and start working together on what we’re going to do about it,” said one plant chairman, “because I’m worried about the future.”
And the UAW was about to get a lot more scared.
Though few recognized it at the time, Ford and the other American automakers had been handed a big break on October 8, 2005, when Delphi Corporation, the largest automotive supplier in the country, filed for Chapter 11 bankruptcy protection.* Like the companies it served, Delphi was groaning under the ever-increasing burden of providing pensions and health care to thousands of retired factory workers and their dependents while union contracts written in better times saddled it with higher labor costs than its foreign competitors and imposed work rules that made its factories inefficient and uncompetitive. What made Delphi different was the way it decided to deal with these problems. After going back and forth with the UAW for months, Delphi walked into bankruptcy court on March 31 and asked a federal judge to void its contract with the union. For the first time anyone could remember, someone was calling the UAW’s bluff.
Hinrichs had left Las Vegas challenging the UAW leaders to negotiate new, more competitive local operating agreements at their factories to close the competitiveness gap ahead of the 2007 national contract talks, warning them that Ford might not make it until then without their help. They were still debating how to respond when they received news of Delphi’s move. It pushed the local UAW leaders to the bargaining table.
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