Union Weakness Lets Firms Seek Big Concessions
By KRIS MAHER and TIMOTHY AEPPEL
Staff Reporters of THE WALL STREET JOURNAL
September 19, 2005; Page A3
As union power wanes, companies are finding it easier to plead global competition and request stringent concessions that workers are unable to accept.
The trend affects a host of industries, including airlines and aerospace, where Northwest Airlines and Boeing Co. have both sought big concessions. Last week, an ATT Holding Co.'s Ames True Temper Inc. shovel-making factory in Parkersburg, W.Va., was padlocked after the union rejected a 58% cut in pay and benefits, which would take pay from $17 an hour to $6.22 an hour, and set a $10,000 deductible for family health insurance coverage.
Such "concessionary bargaining" happens during recessions or industry-specific downturns when some companies face the prospect of filing for protection under the U.S. Bankruptcy Code. What's unusual now is how many cases involve companies that are in good shape but cite increased global competition as the reason for the demands. "A lot of companies now are doing it just because they believe they can; it's opportunistic," says Ron Blackwell, chief economist for the AFL-CIO.
Boeing was riding an overall updraft in the aviation industry but demanded givebacks that led to a strike more than two weeks ago by 18,300 machinists represented by the International Association of Machinists and Aerospace Workers. "We are making an offer that we really feel reflects the realities of our competitive marketplace and recognizes and respects the contributions of our employees," said Chaz Bickers, a Boeing spokesman. "In a nutshell our offer improved upon one of the best pay and benefits packages in the industry."
Stephen Sleigh, director of strategic resources for the Machinists, says the company knows labor is weaker. "Our solidarity front is fractured, and they think they can take advantage of that," Mr. Sleigh says.
The tactic can accelerate erosion of the unions' stature in the eyes of workers. If local union leaders advocate for a concessionary package, they can lose the confidence of rank-and-file members, who may think the union isn't standing up for them. "But if they go on strike and the company beats them in the strike, they still lose confidence," says Mr. Blackwell, adding that companies often move to get workers to decertify their union after such debacles.
At Connell LP's Wabash Alloys, in Wabash, Ind., 193 workers have been locked out since March, when they refused to agree to company demands, including an average wage cut of $3.99 an hour, or an average of 28%. The closely held producer of aluminum alloys hi red replacement workers and a security company after the lockout. In previous negotiations, the company presented the union with financial materials that demonstrated the need for cutbacks, according to Preston Miracle, president of local 1240 of the International Brotherhood of Boilermakers, which represents the workers. This time, he says, "They did not even try to say they were struggling in the marketplace. They just said we need to be more competitive."
A Wabash Alloys representative couldn't be reached to comment.
At Ames True Temper, the company announced in July that it would close the Parkersburg plant with 169 workers unless it reached an agreement with the union on its terms. The company, according to Karen Shipley, the international staff representative for the Steelworkers who led the union's bargaining team, wanted a cut in wages as well as benefit cuts. The union responded with a proposal to trim wages and benefits by 28%, but the company didn't accept that offer.
"The bottom line is that they wanted to make more profit and they felt they could have product made cheaper at other facilities," Ms. Shipley says. The company has four joint ventures in China that make parts such as shovel handles formerly produced in U.S. plants.
Duane Greenly, chief operations officer for the company, said in a statement last week: "We deeply regret, despite the efforts of all concerned, that we were unable to reach an agreement that allows us to be competitive out of our Parkersburg facility." The company closed the factory on Wednesday. An Ames True Temper spokesman said the company wouldn't comment further on the matter.
Demanding steep cuts can also be used to send a message to other unions and workers at other locations. For example, many labor experts viewed Northwest Airlines' proposed 25% wage cuts for its mechanics union as setting the stage for later negotiations with unions representing flight attendants and machinists.
The Aircraft Mechanics Fraternal Association was "presented with something at the bargaining table that they couldn't agree to," says Gary Chaison, a professor at Clark University. "The company was almost saying we dare you to strike," which might not only break AMFA but set a precedent for negotiations.
Morris Kleiner, a professor at the University of Minnesota, says companies want to send a message to workers at other locations. "If they play hardball and close a plant, they send a signal to other plants that they're serious about negotiations," Mr. Kleiner says.
Write to Kris Maher at kris.maher@wsj.com and Timothy Aeppel at timothy.aeppel@wsj.com
