When an elephant rolls over:
Living with the Ford Motor Company

by Bob Briton 

A commentator once likened the US's relationship with its neighbours to 
that of an elephant sharing a bed with a regular person. Snuggled up 
closely to the US in both the geographic and economic sense, things can be 
fine until the elephant needs to roll over. Depending on a transnational 
corporation (TNC) for work is a similar experience, as many thousands of 
workers in the car industry worldwide keep finding.

Last month the Ford Motor Company announced its intention to close five 
plants and "shed" 35,000 workers by the middle of the decade — now only a 
few years away. North America will account for 22,000 of the job losses. 
The world's number two auto manufacturer will be discontinuing a number of 
models and taking other steps to lift the company's fortunes.

The effects of all this have been felt immediately across the globe.

Across the oceans in Adelaide, Schefenacker Vision Systems, which supplies 
components like rear vision mirrors to the local and export markets, 
announced that it would be axing 28 jobs.

A fortnight ago Managing Director Brian Freeborn told meetings of staff 
that the jobs, mostly from the engineering section, were being wound up 
largely because of the difficulties facing its largest customer — the Ford 
Motor Company.

Schefenacker is only one of the many component manufacturers likely to 
suffer the knock-on effects of the Ford disaster.

Schefenacker's announcement took place against a backdrop of continuing 
uncertainty and struggle in the local auto industry. Mitsubishi still has 
the begging bowl out for $140 million worth of public funds to keep its 
Australian operations going.

Last year and continuing into this year, workers in the industry have been 
meeting stiff and unreasonable resistance from bosses during negotiations 
for new Enterprise Bargaining Agreements (EBA's) and over the "Manusafe" 
scheme designed to protect manufacturing workers' entitlements.

From last year the tense battle at Tristar stands out. Already this year 
there has been the struggle around the two-year workplace agreement at 
Suspension Components Pty Ltd in Melbourne.

The injustice of the sackings and the erosion of pay and conditions in the 
industry really stands out when the causes are traced back to their source.

The Ford example is a good one. Aside from the exploitation and anarchy 
inherent in the capitalist system of production, grave consequences await 
workers if the leadership of massive conglomerates like Ford also "get it 
wrong" — and Ford has been getting it wrong quite a lot in recent years.

In the US several models were released which had a tendency to roll over. 
The Bronco II and then the Explorer utility vehicles both had a design 
deficiency made worse by Ford's decision to equip them with light-weight 
Firestone tyres.

The tyres were meant to improve fuel economy, but the combination of a 
truck-like chassis, lightweight case and low tyre pressures caused the 
tread to come apart.

Ford and Firestone knew about the deaths of 35 people and injuries to 
another 130, related to the failures before the US Government launched a 
probe into the accidents.

Then there was Ford's decision to buy huge amounts of the precious metal 
called palladium. The metal is used in the electronics industry and in the 
catalytic converters in the exhaust systems of cars. These converters are 
required by law in the US and help reduce toxic vehicle emissions. 

Fearing that supplies might prove unreliable and that the price of the 
metal would continue to rise, Ford's purchasing department bought up big 
from the mostly Russian sources as prices rose from just under US$100 an 
ounce in the late 1980s to US$1094 in January 2000.

Unfortunately for Ford, prices have continued to fall ever since, leaving 
the manufacturer with stockpiles of grossly overpriced material. 

Unlike its competitor GM, Ford failed to heed early warning signals about 
the price of palladium.

The resulting "write off" of the losses has dismayed investors sensitive to 
accounting practices used to downplay bad news. The Enron collapse has 
heightened this sensitivity.

Investors are also surprised that the Ford Motor Company, which has a 
Treasury Department like a nation state and which regularly uses 
sophisticated "tools" to buffer risks related to interest rates and 
exchange rates, got caught out so badly.

In fact, Ford follows a world wide trend among brand name transnational 
corporations to be clever finance capitalists first and manufacturers 
second.

Last year's Annual Report shows that Ford's total automotive assets were 
US$95,343 million or just over half of the total financial services assets 
figure of US$189,078.

Among its various financial activities, Ford is one of those TNCs that 
lends money for the purchase of its own goods. This practice has been 
encouraged in the US through the use of a tax break, which allows 
corporations to move income from such services to offshore subsidiaries.

The US Administration has waved US$3.8 billion in taxes so far and will 
forego US$21 billion over the next decade if it becomes permanent.

Again, unfortunately for Ford, this finance arm of the giant corporation 
has been under-performing, too. The bottom line tells the story. The Ford 
Motor Company reported US$7.2 billion in net income for 1999; last year it 
lost US$5.5 billion. The share value hovers around a 52-week low of US$14.

The company has few new models in prospect with which to recapture its lost 
market share. This is the background to the announcement that 10 per cent 
of its workforce would be shown the gate.

Other players needn't feel smug. Korean manufacturers KIA and Daewoo have 
both had their scares. Even world number one GM reported that at the end of 
the fourth quarter of 2001, its profits had tumbled 58 per cent. Earnings 
were US$255 million, down from US$609 million a year earlier. For the full 
year, GM earned US$1.5 billion excluding special items. 

A final point. Last July, in an apparent fit of candour, the Ford Motor 
Company made a surprising confession. Every year it releases 400 million 
metric tonnes of carbon dioxide and other greenhouse gases into the 
atmosphere.

That is a whopping one to two per cent of ALL man-made emissions.

It is another reason that Ford regularly appears on the list of bad 
corporate citizens compiled by groups that monitor such behaviour.

It begs the question — given Ford's Nazi supporting past, the deaths from 
the Pinto fuel cells in the 1970s, the Bronco II, the Explorer and their 
delaminating tyres and so on — how much longer can corporations like these 
be allowed to hold the fate of so many people in their hands?