Mulloy has retired as Ford’s Vice President of Labor Affairs, but he took time to speak to the NAGLO participants about how labor and management worked together to save Ford during the economic downturn.
From 2001 to 2008, the US automotive industry lost more than $50 billion. Global competition had intensified, and US domestic auto companies were slowly going out of business. Ford’s labor costs were uncompetitive and increasing on an unsustainable trajectory.
Chrysler and GM took billions of dollars in federal bailout money to stay afloat. But Ford refused to take the taxpayer’s money. Ford’s CEO, Alan Mullaly, put it simply in a meeting: “We’re not taking their f—ing money. We’re going to do it on our own.”
“GM came in with $77 billion and Chrysler came in with $18 billion of government money,” said Mulloy. “People get ticked off at the Patriots for deflating the football! Our competitor just picked up $77 billion and all their creditors are out standing in line and can’t get their money.”
The temptation to take the money was extremely difficult to resist. Mulloy talked about how financial advisors would come into this office and say one thing: “We need to take the money.”
“We had to close 11 assembly plants,” Mulloy said. “Losing an assembly plant is like closing a military base. It’s huge. You’ve got five to six thousand people. The rollover effect, the multiplier effect, from an assembly plant is almost one to 10. So if you’re taking 5,000 jobs out, you’re not taking 5,000, you’re taking 50,000.”
These closures were having a devastating effect on the economy. Mulloy said Ford went from about 114,000 hourly employees to under 40,000.
“We did not have one involuntary reduction. Everyone was done voluntary. We bought out people, and not one was forced out.”
Ford had things like the Education Opportunity Program, which provided employees with money for school as well as expenses and insurance. Employees were able to become doctors, nurses, truck drivers and more. Many employees took lump sum buyout deals worth tens of thousands of dollars.
Ford divested several of its satellite brands. Ford sold its claims to Hertz, Land Rover, Jaguar, Volvo, and Mazda, as well as discontinuing the Mercury line.
The most important key to Ford’s survival was its relationship with the union that represented its workers, the United Auto Workers (UAW). Mulloy said high level meetings between labor leaders and top management officials began to work when everyone realized the humanity of the person sitting across the table.
“They would say, I hate this guy,” said Mulloy. “You’d say, ‘do you know him?’ They’d say no, but I hate him.”
Mulloy’s motto was to be soft on people but hard on problems.
“You can’t walk away from problems,” he said.
Collaboration allowed for some breakthrough agreements. There was an agreement for alternative and flexible work schedules. There were deals on overtime and relief time changes, and bonuses were suspended. The UAW agreed to no increases to base wage or pension levels for traditional employees. There were new, team-based work structures.
By 2011, Ford was back on track and making profits. The company made plans to create 12,000 new jobs in the US and invest more than $16 billion, including $6.2 billion in US plants.
The company was leaner and more efficient, too. In 2006, Ford was making about 37 cars per employee and losing about $15 billion. In 2012, Ford was making about 63 cars per employee and was turning a profit of about $8 billion.
“Now that is remarkable,” he said. “And it’s the reason we didn’t go bankrupt.”
Working together made all the difference, and Mulloy’s point rang loud and clear: Be soft on people, but hard on problems.