Does Ford's UAW Agreement Deflate Bankruptcy Arguments?


This afternoon, the UAW members at Ford overwhelmingly voted in favor of changing their contract with the auto maker.

It is a move that puts Ford on par with foreign auto companies in the U.S. when it comes to hourly labor costs. Even more important, Ford is in line to save billions of dollars by getting the UAW to agree on taking Ford stock as payment for up to half of the unions retiree healthcare fund.

This agreement shows the UAW is ready to change what it gets from the Big 3 in hopes of making them more competitive. If GM and Chrysler can replicate the same agreement with the UAW, it would take some of the air out of the bankruptcy argument you hear from those who oppose Federal loans for the troubled companies.

Over the weekend Republican Senators McCain and Shelby both said that they believe bankruptcy is still the best way to restructure GM and Chrysler. Their argument is that Chapter 11 would let the companies kick out their contracts (including those with the UAW) and re-negotiate deals at a lower rate. That would be a moot point for GM and Chrysler if the companies can follow Ford's lead with the UAW.

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