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Much Ado About Pettiness

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By all rights, Caterpillar Inc. ought to be one happy company these days. Two years of a weak dollar has all but knocked Japan's Komatsu Ltd. off the field, leaving Cat a clear run at the construction-equipment market. Demand is so strong that Cat can't fill many orders for months. As a result, the Peoria company's sales, profits, and market share (chart) are soaring.

So why did some 14,500 steamed-up United Auto Workers members stalk off the job on June 21? Mostly because management didn't know how to be magnanimous in victory. The company won hands-down a 51/2-month strike in 1992, when it threatened to permanently replace its UAW employees. But instead of soothing the feelings of defeated workers, Cat has disciplined and fired union members for mostly petty actions such as wearing T-shirts that disparage the company. This has triggered nine local walkouts since November and culminated in Cat locals demanding that UAW headquarters in Detroit allow a company-wide shutdown. "They've done more to revive the union than anything else," says Alan Musser, a 24-year Decatur (Ill.) worker.

Still, it's by no means clear that the union will emerge victorious in its latest strike. "I hope they know what they're doing," warns former UAW President Douglas Fraser. "It's horribly risky." The threat of replacements still looms large, particularly for the 70% of members within five years of retirement. What's more, because the conflict isn't about wages, some members seem unsure the fight is worth risking their jobs. But even if the UAW's lines break again, the company, too, could lose big. Cat's share price fell 41/4 points, to 1021/8 on June 21, because investors fear its labor problems will continue anyway.

T-SHIRTS AND BUTTONS. Should cooler heads have prevailed? It's hard not to think so. After the 1992 strike collapsed, "many workers were unhappy" with the union, concedes UAW Local 974 President Jerry Brown in Peoria. Union leaders tried to get workers to gum up production by working by the rule book. But members largely ignored the union's request to refuse overtime work and neither productivity nor quality suffered. About all workers did was don T-shirts and buttons with slogans such as "Permanently replace Fites," a reference to Cat's hard-line CEO, Donald V. Fites.

But Fites took the union's bait. Instead of simply ignoring the UAW's toothless gestures, managers disciplined and even fired some dissenting employees. And union officers got similar treatment for taking up such grievances. Overall, the National Labor Relations Board (NLRB) has filed 89 complaints against Cat. But the company denies that it has broken federal labor law.

Such harsh behavior has driven many workers into the union's arms. Decatur welder Nancy Waterman, who hadn't been a union activist in her 18 years at Cat, helped to raise $20,000 from fellow workers to buy TV commercials giving the union's side of the story. Now, she insists, "we will last one day longer than Cat." Says NLRB Regional Director Glenn Zipp: "There is a great sense of indignation on the shop floor about what workers feel is unjust treatment."

Underlying the inflamed tempers, however, are some substantive conflicts. Fites still insists that it's unreasonable for the UAW to demand that Cat agree to the same contract the union won from farm-equipment maker Deere & Co. Because Cat faces greater foreign competition, he argues, it needs a different pact. And though the fight isn't over wages, Cat contends that its pay package is one of the nation's richest: Including overtime, its average UAW worker earned $49,000 last year, plus benefits.

The union has other concerns. With the yen digging into archrival Komatsu's competitiveness, workers figure Cat can afford to meet the UAW's central demand: more protection from layoffs. Indeed, far from cutting back, Cat has hired 1,000 new workers this year alone.

Workers' continuing fears of job loss are inflaming the current conflict. To assure members that their jobs aren't at risk, the union called the current strike only over the NLRB complaints, not over contract demands. Under federal law, this protects workers from being permanently replaced. But Cat is playing on workers' fears of losing their jobs. Caterpillar Vice-President Wayne M. Zimmerman announced that the company will hire new permanent workers, although he said that they wouldn't replace strikers. Generally, he insists, Cat "will do what is necessary to operate our facilities."

Such statements have an ominous ring for many workers. In mid-June, Cat initially refused to take back some workers who had mounted a three-day walkout at its Aurora facility. Even Cat sympathizers say this probably violated federal labor law. "The company's action looked problematical to me," says former NLRB member John Raudagaugh.

FENCE-SITTERS. Given Cat's tough stand, many rank-and-filers are nervous about a prolonged walkout. Robert Williams, a 54-year-old Cat worker who is five months shy of retirement, didn't cross the picket line in 1992 but isn't sure what he'll do this time. "I'm not going to lose my pension," he says. Others seem similarly troubled: Cat claims that on June 22, more than a quarter of its Peoria-area workers stayed on the job.

If more fence-sitters return to work, Cat may not suffer much. The company can bring in products from overseas plants: It has excess capacity in Japan, where demand has fallen 15% since 1992. But with factory stocks tight and dealer inventories no higher than normal, a long strike would bite. "It doesn't look like they've built a lot of hedge against a strike," says analyst Frank Manfredi at Manfredi & Associates.

A fight so bitter seems incomprehensible at a company doing so well. But with tempers hot on both sides, reason may not prevail soon.Kevin Kelly in Aurora, Ill., with David Woodruff in Peoria, and Aaron Bernstein in New York

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