POST-SOCIALIST TRADE UNIONS, LOW PAY AND DECENT WORK
VIETNAM RESEARCH TEAM
CASE STUDY
FORD AUTOMOBILE ASSEMBLY PLANT IN
HAI DUONG - VIETNAM
Hanoi, May 2007
Introduction to Ford Vietnam
The automobile industry of Vietnam remains at its infantry. According to VAMA
(Vietnam Association of Manufacturers of Automobile), there are almost twenty carmakers in Vietnam including Toyota, Mitsubishi, Honda, Mazda, Ford, Daewoo,
Hyundai, Isuzu, Lifan. There is no Vietnamese car-maker yet. Despite heavy protection
of the government over the industry in the hope of blooming up a strong car-making
industry in the example of other regional countries like Malaysia, the inability to
manufacture parts and develop supporting industries has resulted in low localization rate
(approximately 30 percent1) and modest value added. Automobile factories are actually
assembly plants with almost all parts (from engines to screws) imported from other
countries in the world.
Ford assembly plant is a joint-venture between Ford Corporation and Diesel Song
Kong, a state-owned engine producer. The latter owns only 20 percent of the joint
venture's charter capital and in fact, claims no influencing voice in the management of the
company. The parent company of Diesel Song Kong is Vietnam Industrial Machinery
(VIM) - a general corporation subordinate to the Ministry of Industry of Vietnam.
As the human resource manager of Ford told us, Ford is having difficulties in
Asia-Pacific region. In Vietnam, Ford is neither the biggest nor the most successful
producer. In fact, Toyota has been the top player for many years, claiming almost 40
percent of the domestic market share. So far, all products of Ford are sold in Vietnam but
the company is planning to cooperate with Mazda to export to the Southeast Asian
region.
Apart from representative offices in Hanoi and Ho Chi Minh city, Ford plant in
Hai Duong is the only assembly factory of Ford corporation in Vietnam, which was set
up in 1995. The plant accommodates a single assembly line2 which produces six Ford
automobile models including Focus, Transit, Mondeo, Escape, Ranger and Everest. The
period from 2000 to 2005 was considered the "peak time" of the automobile industry and
Ford Vietnam when, thanks to the growth of the economy and emergence of the young
middle class, sales rocketed at 40 percent per year3. In 2006, however, as the government
allowed for importation of second-handed cars and increased import tax of car parts, sales
dropped and Ford production has shrunk by over 30 percent4. Last year, the production of
the plant was 4,000 cars.
Labour and Remuneration
Nationwide, Ford employs 563 workers; at the plant, the labour force is 400
workers, among them 300 are blue-collar workers who are addressed as "technicians" (ky
thuat vien) rather than ”workers" (cong nhan) - the term normally used for blue-collar
Ministry of Trade, Vietnam. 2006
The assembly line, as we observed, has surprisingly low level of
automation. The work, therefore, depends on skills of workers.
3 Ministry of Trade, Vietnam. 2005
4 This information was provided to us by the HRM of Ford.
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workers5. The minimum level of education for technicians is graduation of technical
college (3 years) or technical high school (2 years). From our observation, most
technicians are of 30-40 years of age. Opposite to the labour-intensive industries, only 10
percent of Ford's labour force is women. Most workers are local residents of Hai Duong
who travel to work every day by their own bikes or scooters. The higher-level managers,
however, mostly come from Hanoi. They are commuted to the plant by the company's
cars. There are four expiate managers working in the plant: three Americans and one
Taiwanese who are the board manager, deputy director, heads of the technical and
finance sections. The manager of the HR department is a young Vietnamese woman.
The training policy of the company is well-coordinated with the training programs
of the global Ford corporation. New recruits receive two days' training before starting
work. Training needs assessment is carried out periodically by global Ford and training
courses are often provided by engineers from the headquarter. When a new model is
introduced, the company also organizes a short training course for all workers involved.
The turnover rate of the automobile industry had been low until 2006 when it
increased to 12 percent. However, as the human resource manager said, fluctuations of
sales forecast coupled with the unpredictability of government policy change make it
highly risky for the company to recruit more workers at the moment. On the other hand,
the company has never made any forceful reduction, even during depression time of
2005-2006: of course it is legal to lay off workers in case of depression which is not due
to the fault of the company; however, if workers bring the case to court, the company will
lose; that was the case of Toyota a few years ago when they dismissed workers due to a
change of government policy but finally they lost to the laid-off in Court, the HR manager
told us. Another way of reducing the work force is to let go workers whose labour
contracts have expired. This is also the major method of labour reduction adopted by
enterprises in Vietnam.
A majority of workers have signed indefinite-term contracts with the company
and only 80 workers are working under short-term contracts (one to two years).
According to the HR manager and the union chairman, there is no provision on reassignment in the labour contracts, both short-term and indefinite-term ones. While the
American managers find it natural to move workers from one post to another, Vietnamese
workers often show their reluctance to change their working positions. The HR manager
said: sometimes we find it necessary and more effective to move some workers to other
posts but we have no way to force them to if workers are not willing. They often say that
their professional training is not appropriate for the new position.
It is Ford's policy that specific salary rates are kept confidential and it is supposed
that only the individual know how much he earns. The entry rate for a technician is VND
1,433,000. Every April, salaries will be reviewed depending on workers' performance
appraisal and payment by competitors. The performance appraisal is carried out every six
In Vietnamese, the term 'technician' implies a worker with more
technical training and better skills than those called "workers". The
latter often refers to manual or unskilled workers.
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months. There are seven levels of appraisal including A+, A, A-, B+, B, B-, and C6. The
HR manager told us: the global policy of Ford is that C workers receive no wage
increase or bonus at all but in Vietnam C workers is still granted with 60 percent of two
months' salary at the end of the year as bonus. Giving bonus to all workers, good and
bad, is an unwritten rule here.
We notify a conflict between what the union chairman and the HR manager told
us. While the former asserted that a worker appraised as C player for two consecutive
years would be dismissed; the latter admitted that laying off a worker due to their poor
performance is almost impossible. The only way is to wait until his/her labour contract
ends. In 2006, three percent of the work force was C players.
The HR manager stated that compared to other car-makers in Vietnam, Ford pays
higher in terms of basic salary. However, a worker at the painting shop argued that
though Ford pays well, it is not necessarily the highest payer: I know that Japanese
companies also pay well and they are more generous in terms of benefits. For example,
while Ford gives on average 2 months' salary as annual bonus, Toyota grants their
workers 8 months' salary every year before Tet. In 2006, the company had difficulties and
our salaries are becoming lower compared to workers in Japanese car-makers, the
worker observed.
Poaching has been a common practice in the automobile industry where skilled
workers are hunted for. Ford, however, remains confident, as the HR manager asserted,
because apart from high pay, its promotion path is much faster and more merit-based
rather than seniority-based in comparison with the Japanese competitors: workers from
Toyota may work for Ford but not vice versa, she said. The increase of labour turnover
rate since last year, nonetheless, has counter-argued her confidence: I thought of moving
to another enterprise, to tell you the truth, but I live in Hai Duong so it will be difficult
for me to work for companies in Hanoi7, a technician told us.
Union Organization
Ford's union was set up in 1998. Now, all workers and Vietnamese managers are
union members. The last election, also the second one so far, was held in 2005. The union
committee consists of seven members including a staff of the customer service division
(union chairman), an HR staff, a body shop engineer, a finance staff, a medical doctor, a
technician, and the customer service manager (recently quit the company). The
incumbent chairman won over two other candidates in the 2005 election.
The union chairman speaks good English, which, he said, is an advantage over the
last union chairman: the first chairman does not speak English at all so he could not talk
to the American managers; he was like a puppet only, unable to do anything for workers;
therefore workers disliked him; he knew that so he voluntarily withdrew from the post.
A means 'achieved' and C means 'improvement required' which is only
given to workers with obvious faults
7 In the North, most automobile assembly plants concentrate in Hanoi and
its suburbs. Ford plant is farest from Hanoi compared to others.
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When asked if he finds it a problem when most of union committee members are
office staff, Ford safety officer said: Office staff are closer to the management so they
know how to talk to them, how to deal with the company’s procedures; they also have
better access to information of the business. Factory workers like us would benefit more
if they are in the union.
There is no separate labour conciliation council in the enterprise8 but the
conciliation function is incorporated into the Discipline Council which includes a deputy
director, HR manager, safety officer, a legal adviser and the union chairman. The
mandate of the council covers discipline matters, individual and collective dispute
resolution.
The collective agreement, drafted by the HR department, was signed in December
2006. Important provisions of the CBA, according to the union chairman, are advanced
payment of maternity leave and fair record and payment of overtime work. No annual
salary increase rate is specified in the CBA though, as mentioned earlier, salaries are
reviewed, and most of the time, raised every April.
Relationship between Ford union and higher level unions
The unions of Ford, Toyota, Suzuki, and Honda are affiliated to the union of VIM
as they all joint-venture with member companies of the general corporation. VIM union
meets with their members 15 to 20 times/year over issues such as strike prevention,
working with the HR manager, CBA negotiation skills, addressing workers' complaints,
among others.
Union chairmen of the four car makers maintain a strong, though informal,
cooperative relationship by sharing with one another experiences both directly after
meetings of VIM union and indirectly through email and telephone. They often talk about
how to record overtime hours, how to extend and manage the union fund, what benefits
to be included in the CBA and how to. Ford union chairman told us: there is no such
connection among the management of the four companies but among union guys, we have
a feeling of unity so we chat freely to share experience with one another. This informal
club of union chairmen has been particularly useful for a new unionists, Ford union
chairman told us: When I first acceded to the position, I had no experience at all, where
and how to start. I met them at VIM union’s meetings, they approached me and we
talked. They helped me a lot to find answers to my questions.
Most recently, the union chairman of Suzuki shared with his counterparts that
Suzuki union has persuaded the company to allocate VND 40,000/worker to the union
fund. Ford union chairman told us he is proposing to include a similar provision into the
next CBA: this would be useful for the union because the company is a joint-venture and
as provided by law, it does not have to contribute to the union fund, he said.
The Labour Code provides that each unionized enterprise must set up a
bipartite conciliation council to deal with labour disputes of the
company
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The relationship among unions of the four car-makers, however, has not been
solidated into any formal initiative. The outcome of collective bargaining in one company
can be shared with others but they have not had any idea of coordinating to negotiate
collectively yet.
Not directly subordinate to Hai Duong provincial VGCL, but Ford union would
be invited to quite a few events organized by the former such as safety contests, training
courses on union skills (union marketing, negotiation etc.).
Relationship among Workers - Union - Management
Due to unpredictable fluctuations of the market in 2006, Ford had to shut down
the factory now and then. Therefore, the management asked the union to sign a letter of
agreement regarding payment of workers during factory shut-down. Originally, the
company agreed to pay only 70 percent of salary during shut-down time. I had to
negotiate with them for two or three months. The HR manager told us that six over ten
car-makers they consulted pay 70 percent while four companies pay 75 percent. She
persuaded us to take 70 percent like the majoriyt, the union chairman recalled. After
consulting the union committee members and workers as well as the higher-level union
(VIM union), Ford union proposed for 75 percent. They reasoned that the law requires
payment of 75 percent of salary for sickness benefit to ensure minimum living standards.
The situation of factory shut-down for workers would be similar and 75 percent is more
appropriate. Second, four car makers have already paid 75 percent. Ford has been famous
for being one of the top automobile companies, it should pay as well as those four
companies. The HR manager, however, complained: 70 percent is already too high
because the business is facing with so many difficulties; 75 percent is a concession as we
do not want to make our relationship with the union tense9.
The consultation process during negotiation of the Letter of Agreement went
through three steps: first, the HR manager talked to the union chairman; then, the
chairman informed union committee members and team leaders who are also head of
union units. The team leaders later consulted workers. Actually, as admitted by the union
chairman, the communication between the union and team leaders/workers was carried
out mainly by the body shop engineer and the technician who are more familiar with
blue-collar workers than other office-staff members of the union committee.
In our observation, there is a demarcation line between the office and office staff
versus the factory and blue-collar workers. Office staff group together during lunch time
and rarely get to the factory. Therefore, it seems to us that direct communication between
the union and blue-collar workers are primarily carried out by the two union committee
members who are factory workers themselves rather than the union chairman or other
office members.
In our short interviews with the body shop engineer and the technician, the two
members of the union committee, during lunch time, they downplayed their role as the
The Labour Code provides for payment of 70 percent of basic salary to
workers during shut-down time.
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bridge between the union and workers: may be it is easier for us to talk to workers
because we work in the factory but we are not familiar with the management and the
company office. In negotiation with the managers, the office people are advantageous
over us. The body shop engineer has been working for Ford for 6 year. He is also the
head of the union unit of the body shop. The technician who works in the painting shop
has been here for almost 4 years but he is not the head of the painting section. After
lunch, workers in the same shop, engineers and technicians alike, chat a bit and take a
short nap on the shop floor. The body shop engineer told us, he does not often organize
meetings as such with other workers in the same section. When something needs to be
discussed or informed, they talked over lunch, before the lunch nap or after work. During
working time, they have to stand in the assembly line and would not have chance to
gather and talk: the technical job is first priority so we focus on our job during working
time to ensure the overall productivity; we can flexibly find time during lunch or after
work to discuss union issues.
As mentioned earlier, the whole assembly line from unboxing to body shop and
welding, painting and quality checking sections are placed in one factory. So when
necessary, heads of different sections (team leaders) can meet and talk shortly: I talk to
heads of other shops frequently over various issues: technical matters, productivity,
workers’ complaints, and also about union work because we are all heads of workshop
unions. The body shop engineer expressed his concern: Two years ago, you would never
see cars lining up like that, they would be sold immediately after being made. But now,
we are having bad time and our salaries are getting lower comparatively while the living
costs are getting higher. Workers in my section complained a lot to me. I told the
American technical manager once that I know we are having difficulty but if Ford does
not pay workers higher, they would lose the best ones.
It is interesting to note that the procedure for addressing individual workers'
complaints passes the same steps. The complaint from workers is passed on to the team
leader, when fails to deal with it himself, submits it to the union chairman. The latter
would talk to the HR manager to settle the problem.
Most complaints of workers evolve from unrecorded overtime work, discipline,
uniform and meals. The union committee would distinguish between what they call
'legitimate' and 'non-legitimate' demands depending on their own assessment of the
company's situation and capacity. If a complaint is branded "non-legitimate", a union
committee member would meet and explain to the worker, persuading him not to push for
the complaint again. A legitimate demand, then, would be brought to the bi-monthly
meetings with the HR manager.
The last HR manager was an American who paid due attention to strengthening
relations with the union. And this policy was inherited by the current HR manager. Her
principle is: always consult the union before doing anything and do not wait for the union
to approach you, be proactive. However, as we find out from other interviewees, this
policy appears difficult to be kept in the future as the union has become more demanding,
skillful and persistent in claiming higher benefits while the business itself is losing
heavily.
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The union is now in negotiation with the HR department of payment during force
majeure situations such as natural disasters, epidemic, fire, or black-out when the
company has to shut down. Similar to the last letter of agreement, this proposal was
initiated by the HR department. They offer no payment but compensation work if the shut
down lasts one to two days; 40 percent of basic salary if the company shut down for 3 to
30 days and payment of minimum wage (VND 780,000) if the shut-down goes on over
30 days. The union asks for 75 percent of basic salary if the factory closes down for over
3 days since 40 percent of basic salary or the minimum wage is too low to sustain a
decent living standard for workers and their families. The company, however, has not
responded to the union’s proposal yet.
There has never been any strike in Ford so far though during the 2006 Tet, Hai
Duong was heavily affected by the wave of strikes. Team leaders and workers themselves
have not thought of going on strike any time in the near future: we are not as miserable
as workers who had to go on strike, a technician said, wage and working conditinos here
are still acceptable.
According to the union chairman, to prevent strikes, it is important to limit
problems to workshop level. Also, maintaining good communication through union
committee members effectively contribute to developing smooth labour-management
relations. When a sign of dispute is identified, the union chairman would talk to the HR
manager to work out solutions.
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Major Findings
1. Ford's union distinguishes itself from the traditional model of union in a subtle but
important way: while a majority of the union committee members, including the union
chairman, are office staff, two workers have been included. These two members are
crucial in maintaining the communication between the union, the company and workers
in the factory. When the advantages of a union chairman who speak good English, be
familiar with the management and company procedures, are combined with the influence
of the two blue-collar union committee members, Ford's union seems to be doing well,
particularly in maintaining the stability of labour-management relations and enhancing
some certain benefits for workers (shut-down payment, for instance).
2. The case of Ford reaffirms the conclusion of the Carimax Saigon case in showing that
the team leaders/line leaders have substantial influence over workers. Even though in
Ford, team leaders have not taken such assertive actions as those in Carimax, they
effectively work as the trusted bridge between workers and the union as well as the
management. Also, experience have it that in many cases, they are key to the success or
failure of union work: when they are incorporated into the official union system, like in
Ford, it is likely that the communication between the union and the company and workers
runs smoothly; otherwise, an unofficial union network may be set up, like in Carimax.
3. There exists a sense of unity among unions in the same industry even though their
companies are competitors. A success in collective bargaining or change of workers'
benefits of any company, therefore, tends to yield a spill-over effect on other companies
in the industry through the union channel.
4. Unfortunately, as the business is losing, the labour-management relationship is
expected to get more tense in the near future. On one hand, the management is less likely
to accept union’s proposals which they may no longer be able to afford. On the other
hand, when the working conditions are no longer competitive in comparison with other
car makers, workers may either take the exit decision or turn to strike. The latter is more
a subjective anticipation of the author, taking into account that no car maker has suffered
from strike so far though Hai Phong and Hai Duong have recently become the
concentration of strikes in the North.
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