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Dark clouds blotting out Ford’s sunshiny forecast

November 9th, 2009  |  Matt Pavich

>In a classic good news-bad news situation, Ford Motor Company workers overwhelmingly rejected contract changes that would have allowed Ford to cut labor costs in the same week in which the company announced earnings of almost $1 billion in the third quarter of 2009.

Ford sought the deal to bring its labor costs in line with its automotive rivals Chrysler Group and General Motors, both of which won concessions from the union as they headed into bankruptcy protection earlier this year. But Ford’s relative comparatively good fortune worked to its disadvantage. Given that Ford avoided bankruptcy, and looking at the projected earnings, the automaker’s workers weren’t convinced they should make more concessions, essentially saying, “You want sacrifices from us? Show us why.”

It’s not as though Ford was offering nothing. The company was offering workers a $1,000 bonus if they ratified the contract. But the contract also would have frozen entry-level pay and limited workers’ ability to strike.

With UAW President Ron Gettelfinger’s previous statement that there wouldn’t be another vote if the contract changes failed, the question for Ford now has got to be, where does the company go from here?

Ford could offer a more lucrative incentive bonus package to try to lure in its reluctant workforce. It could diminish the level of concessions that it’s asking its workers to make. But the one thing Ford can’t do is sit idle. Industry analysts attribute part of the company’s earnings to the government’s cash-for-clunker program, not something that Ford can rely upon for sustained growth. And should things turn sour for the company, it’s highly unlikely that a government bailout would be an option.

One thing seems certain. If the automaker doesn’t do something to bring its labor costs in line with its competitors, it’s not going to have to worry about how its employees will react to future profit announcements.