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Why Ford Is Facing a Strike at Its F-150 Factory

The all-new F-150 has been rolling off of assembly lines at Ford's Kansas City plant for a few months now. But those lines could stop if workers go ahead with a threat to strike next week. Image source: Ford Motor Company.

Fiat Chrysler is facing high drama as its workers seem poised to reject a new labor agreement -- but it's not the only Detroit automaker contending with angry union members.

Workers at Ford 's Kansas City Assembly Plant are threatening a strike. They say that their labor leaders haven't been able to come to terms with Ford management on a new local contract.

A local contract is a factory-specific deal that is separate from the national labor agreement. Workers say that Ford has resisted making important changes -- and they've given Ford until Monday to come up with an acceptable new one.

If a new local deal doesn't happen, the workers say that they'll go on strike. That could be an expensive mess for the Blue Oval.

A strike at Kansas City would be very messy for Ford

Ford's Kansas City Assembly Plant is a 4 million-square-foot facility that manufactures Ford's popular Transit vans -- as well as Ford's all-important F-150 pickup.

F-150s are also made at another Ford factory, in Dearborn, Michigan. But pickup sales are huge for Ford. Right now, it needs all the trucks it can get.

Supplies of Ford's super-popular pickup have been tight for months. That's because the new-for-2015 F-150 features aluminum body panels, an industry first. The process of making aluminum-bodied vehicles is different from that of making steel ones. That means that both the Kansas City and Dearborn assembly lines had to be shut down and extensively reconfigured .

That downtime cost Ford about 90,000 units of production, and it left dealers with limited supplies of Ford's all-new to sell. But both factories have been up to full speed for a while now. F-150 inventories are finally beginning to reach normal levels, and Ford has started an aggressive push to take back lost market share from its pickup arch-rival, General Motors.

The UAW knows that. That probably has a lot to do with why it is choosing to push a dispute at this particular factory.

This probably isn't just about Kansas City's local deal

I suspect that this isn't so much about the local contract at Kansas City as it is about what's happening at Fiat Chrysler.

FCA's workers don't like the new deal that UAW leaders negotiated on their behalf. Their biggest complaint is that the new contract doesn't phase out the hated "two-tier system," under which new hires are paid a lot less than veterans.

The "two-tier" system came into being in 2007, when GM, Ford, and Chrysler were all fighting for survival. It was a very bitter pill for the UAW to swallow. But at the time, it seemed like the alternative was to let one or more of the automakers collapse.

Workers hate the system. They complain -- with some obvious justification -- that it's unfair to pay two different workers very different wages to do the same jobs side by side.

Workers would probably agree to a deal that eliminated the system gradually, over several years. But while the deal with FCA does give the lower-tier workers a series of raises that bring them closer to the veterans' wages, it doesn't eliminate the system.

That's a huge bone of contention. FCA has more of the lower-paid "tier two" workers than Ford and GM -- but all three have some, and workers at all three want the system gone.

I think the drama at Kansas City is the UAW's way of firing a big warning shot at Ford over the two-tier system.

A non-subtle way for the UAW to get Ford's attention

It's hard to know what will happen if FCA workers reject their contract. Such a rejection hasn't happened in Detroit in many years.

The UAW typically seeks to come to agreement with one of the three Detroit automakers on a new contract, and then use that contract as a "template" for its negotiations with the other two.

If the FCA deal gets defeated, the UAW could simply go back to the bargaining table with FCA. But it could also decide to try to craft its template agreement with Ford or GM instead.

The unrest at Kansas City could be the UAW's way of telling Ford that it's up next -- and that it had better start thinking hard about that two-tier system. Stay tuned.

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The article Why Ford Is Facing a Strike at Its F-150 Factory originally appeared on Fool.com.

John Rosevear owns shares of -- and The Motley Fool recommends -- Ford and General Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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