Deal With U.A.W. Won’t Put Ford at a Disadvantage, Analysts Say

When autoworkers went on strike in September, executives of the large U.S. automakers warned that union demands could significantly undermine their ability to compete in a fast-changing industry. The chief executive of Ford Motor said that the company might have to scrap its investment in electric vehicles.

The future doesn’t look quite that bleak now that Ford and the United Automobile Workers union have reached a tentative agreement that is likely to serve as a template for deals the union eventually reaches with General Motors and Stellantis, the maker of Ram, Jeep and Chrysler.

Ford’s cost will rise under the terms of the new contract, which includes a 25 percent raise over four and a half years, improved retirement benefits and other provisions. But analysts said those increases should be manageable. What will matter more for the company’s prospects, they said, is how innovative and efficient the company is in designing and producing cars and technology that can compete with offerings from Tesla, which dominates electric vehicles, the fastest growing segment of the auto industry.

“They haven’t agreed to anything that will kill their competitiveness,” said Joshua Murray, an assistant professor at Vanderbilt University who is co-author of a book that examined how U.S. automakers lost ground to Japanese and European rivals. If anything, he said, the deal will help Ford, in part because the four-year contract ensures there will be no labor strife during an intense phase of the transition to electric vehicles.

“They won’t be engaged in labor conflict while they’re dealing with” the technology shift, Mr. Murray said.

Wall Street appeared to agree. Ford shares were down a little on Thursday afternoon, an indication that investors regard the labor pact as in line with expectations. Analysts at Barclays estimated the annual cost of pay raises, improved retirement benefits and other measures to be $1 billion to $2 billion annually by the end of the four-year contract, or around 1 percent of sales.

During the contentious negotiations, Ford complained that a big raise for workers would put it even further behind Tesla in the electric vehicle market. Sales of Ford’s two main battery-powered models, the F-150 Lightning truck and the Mustang Mach-E sport-utility vehicle, have been disappointing this year, and the company recently scaled back plans to increase production of the Lightning.

But Tesla and other automakers like Toyota, Nissan and Honda, whose factories in the United States do not have unions, may now face pressure to raise wages, eroding any cost advantage they might have had.

The U.A.W. has declared its intention to try to organize those factories. The pay agreement with Ford, by far the biggest boost in compensation that the union has won in decades, is likely to serve as a powerful advertisement for collective bargaining. Tesla and other carmakers that don’t have union workers in the United States, a group that includes BMW, Mercedes-Benz and Volkswagen, may decide to pre-emptively hand out raises to keep labor organizers at bay.

“One strategy to deter union organizing is to raise wages,” said Rebecca Kolins Givan, an associate professor of labor studies and employment relations at Rutgers University.

The decisive factor in the electric vehicle market will be the ability of Ford, G.M. and Stellantis to produce innovative products, Ms. Givan and others said. That is the responsibility of management, not assembly line workers.

“It’s clear that these companies have work to do in the electric vehicle market,” Ms. Givan said. “There is nothing in this contract that creates any constraints.”