Labor is one of the most important factors of production for any organization. For many organizations, overall bottom line performance relies on the quality and quantity of labor they have, and the commitment of the labor force to the organization. Often, problems in labor relations within organizations lead to turbulent performance for the organization caused by reduced and demoralized performance from the labor force. Organizations that have cultivated an understanding relationship with their workforce, on the other hand, tend to see better performance even during tempestuous economic times. One of the companies that are a testament to the benefits of good labor relations is Ford Motors. Facing bankruptcy, Ford’s labor union, UAW (United Auto Workers), was instrumental in saving the company. Ford’s cultivation of a healthy working relationship with its employees has enabled the company to not only weather economic downturns but also bounce back as one of the Big Three automakers in America
As one of the Big Three automakers in the U.S. (the other two are GM (General Motors) and Fiat Chrysler) Ford Motors is one the oldest companies in the U.S. The company started its operations in 1896, building its first car, a quadricycle, before its proper restructuring and establishment in 1899 as Detroit Automobile Company (Davis, 2003). Davis (2003) informs that the company was incorporated as Ford Motor Company in 1903. Its incorporation marked the start of its journey to becoming one of the biggest automakers in the world.
From its establishment, Ford has expanded its operations from the U.S. to across the world. Davis (2003) posits that Ford began its expansion outside America in 1904 with the creation of Ford Canada. The company had operations in France Denmark, Ireland, England, Japan, Germany, South Africa, and Australia by 1925 (Davis, 2003). Ford has since expanded its operations across the world, with manufacturing and distribution in more than 200 markets across five continents (Haas-Kotzegger, 2013). According to Ford (2019), the company’s current operations span the different offices/plants for specific operations that include transmission, assembly, forging, stamping, and engine manufacture. Ford’s transmission plants are located in the U.S., U.K., China, France, Germany, Slovakia, Brazil, and Mexico. Its assembly plants span across the world in the U.S., Canada, China, Germany, India, Mexico, Romania, Russia, South Africa, Spain, Thailand, Turkey, Venezuela, Vietnam, Taiwan, and Brazil. Similar international distribution rings true for its forging, stamping, and engine manufacture plants.
Ford additionally expanded its portfolio through an evolution of its business offering. The company has a financial division that caters to a diverse range of businesses. The financial division includes the Central Treasury Operations (CTO), Mobility, and Financial Services (Haas-Kotzegger, 2013; Reuters, 2019). Ford’s CTO primarily assists the automobile division by making decisions on investment, risk management, and financing. Mobility, on the other hand, invests in mobility services for both the company and other customers (Johnson, 2018). Ford Financial Services, as one of the oldest subsidiaries, offers financial services via Ford Motor Credit Company LLC. The subsidiary primarily provides vehicle financing and leasing services to potential customers.
Ford’s international operations largely rely on its huge labor force. Haas-Kotzegger (2013) informs that as of 2007 the company had 246,000 employees across its two divisions and worldwide operations. Through restructuring, however, the company’s labor force has reduced to 166,000 (Ferris, 2019; Ford, 2019). Employees in the company’s operations include engineers, assembly workers, financial services experts, and the company’s executive.
Ford’s profitability and success rely on its employees, a fact acknowledge by the company’s management. According to Yang (2014), Ford was able to bounce back from financial turmoil in the early to late 2000s due to the employees’ dedication. In the face of financial ruin, Ford’s employees came together under Ford’s ONE Ford plan and helped in restructuring and returning Ford’s North American operations to profitability. Vlasic and Jolly (2012) inform that the company took a similar approach in 2013 through negotiation with employees and mutual understanding that saw the company close two facilities in the U.K. and stop production at its Belgian assembly plant in 2014. While the closure of the plants came even after Ford had promised to build a new plant in Genk, the company went into consultation with union officials in Belgium to work out compensation to the employees (Vlasic & Jolly, 2012). The consultation with union officials on the closure of the company attests to Ford’s respect for the livelihoods of the employees.
Closing the plants falls within Ford’s strategic plan. Jolly (2019) informs that aside from the plants closed in 2013, Ford also plans to close its Bridgend plant by 2020, a move that will see 1,700 people lose their jobs. While losing jobs is catastrophic to employees, it is part of Ford’s strategic plan that aims at either improving or exiting less profitable vehicles (Ford, 2019). Ford had to close the three plants (in 2013) given that they were running at 66% capacity even as growth in the automotive industry continued to shrink (Vlasic & Jolly, 2012). For the Bridgend factory, its operations were more costly than other plants since it catered for only one-fifth of the demand of the 700,000 engines it produced in its peak years (Jolly, 2019). However, even in its move to close the plants, Ford has consistently consulted with employee union officials and other stakeholders towards the implementation of an all-inclusive transformation strategy focused on bolstering the Ford brand and fashioning a sustainably profitable business.
Ford’s management acknowledges the role played by employees in the company’s success. Even as the company continued in its restructuring, expansion, and success, it shares its success with its employees. Yang (2014) posits: “In early 2013, for example, eligible U.S. hourly employees received average profit-sharing payments of $8,300 for the 2012 performance year” (p. 80). The profit-sharing also included salaried employees who received bonuses under the Annual Incentive Compensation Plan. Ford has continued to show commitment to its employees through bonuses and leadership development across all its worldwide operations.
Ford employees view the company as a fair and equal opportunity employer. A study comparing job satisfaction in the automotive and IT industries showed that IT lead with a mean score of 80.62 against 77.19 for the automobile industry (Mantri & Narkhede, 2014). Even with this difference in job satisfaction, employee satisfaction index for Ford employees has been growing. Yang (2014) shows that between 2007 and 2012, Ford’s employees’ satisfaction index grew from 64 to 71, showing improvements in the way in which the company treats its employees. Similarly, the company showed improvement in the management’s commitment to diversity as shown by a 2012 employee-centric survey. Between 2007 and 2012, the company’s commitment to diversity score improved from 77 to 86 respectively, with yearly incremental improvements (Yang, 2014). The scores show that Ford employees value their time and effort in the company given the company’s reciprocation of the employees’ skills.
Unions play an important role in the relationship between employees and management at Ford. Smith (2012) contends that the good labor relations between Ford and UAW helped the company avert bankruptcy in the 2000s. During the period, Ford accrued $50 billion in losses and almost went bankrupt (Smith, 2012). The company and the union worked on reducing Ford’s employees, bringing them from 100,000 to 45,000 through voluntary buyouts and retirement. Additionally, the company reduced the number of brands it had under its name selling Volvo, Land Rover, and Mazda. The agreement with the union also involved a concession in pay, agreeing to pay new hires lower pay. When the company returned to profitability, employees also benefitted with a 10 to 15 percent pay rise.
In recent times, through the cultivation of a good relationship with unions, Ford avoided a strike by its employees as witnessed by its rival GM. GM workers staged a 40-day walkout that cost the company $4 billion in earnings (Naughton, 2019; Vinoski, 2019). In an agreement with UAW union officials, Ford agreed to a 3% wage increase for its workers and 4 percent lump-sum payment in the first and third years of employment contracts; an agreement that was similar to GM workers’ after the strike (Boudette, 2019). The fact that the union and Ford reached the agreement without industrial action shows a healthy working relationship between the two: an arrangement welcome by the union and which employees would want to continue.
Ford is a testament to a good employer-employee working relationship. By cultivating a good working relationship between the organization and the employees/union, Ford has been able to come from bankruptcy with the help of employees. The company understands the value of labor as a factor of production and invests in its employees, a move that has paid back bountifully.
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Ferris, R. (2019). Ford’s 5 big fixes for its troubled international business. CNBC. Retrieved from https://www.cnbc.com/2019/01/24/fords-5-big-fixes-for-its-troubled-international-business.html.
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