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Wednesday, August 09, 2006

Ford: Does The UAW Speak With Forked Tongue?

Stocks: (F)

Read this. "We're open to whatever helps the company and protects our members," said UAW Vice President Bob King. (Source: Detroit Free Press)

The UAW is obviously aware of the problems that bedevil Ford. But, the largest problem Ford has is the UAW. If the auto giant could wave a magic wand and make its high hourly wages, health benefits, and pension obligations in North American go away, Ford would be one of the most financially healthy companies in the United State.

The UAW is willing to help Ford. But, of course, it has to protect its members. To show how investors can be taken in by a quote of two, Ford’s stock rose over 3% between the regular session and after hours to $7.40. That’s still down from its $10.62 high for the last 52-weeks, but, if management will all agree that they will work for free maybe the stock will make another move.

With Ford’s North American market share at 16% which is now lower that Toyota’s, the UAW would have to sacrifice tens of thousand of more jobs to get Ford out of its mess. And, that assumes that sales do not get worse. Ford’s North American operations lost $797 million in the last quarter when one-time charges are taken out.

Forbes’ auto expert Jerry Flint put it very well. He points out that in 1999 Ford had nearly 25% of the market. That year the company had a pretax profit of $11 billion. Based on an annualized loss in North America of $4 billion this year, this would make a share point worth about $1.5 billion.

Flint also points out that Ford will not have a full line-up of new vehicles until 2010. And, Flint may be the best business writer covering the car industry.

Each time Ford’s share drops a point, it needs to find that $1.5 billion somewhere. And, the UAW has to “protect its members.”

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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