News: Analysis & Commentary: LABOR
THE UAW: CAUGHT IN CAT'S CLAWS
For almost 18 months now, some 9,000 United Auto Workers have futilely manned picket lines at Caterpillar Inc. By any calculation, the strike has been a dismal failure. The company has posted record profits, productivity has soared, and nearly a third of the union's members have returned to work. The final insult is likely to come on Nov. 28, when management plans to give strikers a new proposal that insiders say is almost exactly the same as the one rejected by the UAW in 1992. Given their gloomy prospects, union members may have little choice but to accept it.
If they do, it will be a devastating blow to the UAW. Caterpillar will have forced the union to agree to items UAW leaders once swore to oppose, company sources say, including lower wages for new hires, flexible work rules, and a new, managed-care health-care plan (table). In return, Cat may provide a generous early-retirement plan. Neither side will comment officially, but make no mistake: The company has won. "The UAW simply has to cut its losses," says management-labor attorney and former National Labor Relations Board member John Raudabaugh.
The reverberations will be felt well beyond Caterpillar. The closely watched battle has taught Corporate America a lesson: Nearly anyone can be replaced, even highly skilled manufacturing workers supported by a $1 billion strike fund and the country's most powerful union. The Cat denouement also is a forceful reminder of the obstacles faced by AFL-CIO President John J. Sweeney, who swept into office last month with vows to revive organized labor. Says Wharton School management professor Peter Capelli: "Caterpillar shows that efforts to rejuvenate the labor movement will be very difficult."
Many outsiders doubted that Caterpillar could hold out for long when its 13,500 unionized factory hands walked off the job in June, 1994. Conventional wisdom--even among executives of other large, unionized manufacturers--held that Cat's experienced welders and machinists simply couldn't be replaced en masse. But Cat adroitly shifted some production overseas and used temporary-help agencies to tap into a national labor pool of skilled workers. The tactics allowed the company to produce plenty of bulldozers and earthmovers to meet demand. Indeed, Cat's revenues will jump by 10%, to $15.2 billion, this year, while net income will soar 20%, to $1.15 billion, predicts Sanford C. Bernstein & Co. analyst Lisa Shalett.
The dispute is close to being settled largely because of leadership shifts at the UAW. The union, under chief negotiator Bill J. Casstevens, had battled Cat since 1991. But this June, Casstevens retired, and Stephen P. Yokich was elected as the UAW's president. Yokich set out to end the disastrous strike.
If he is to succeed, his members will have to swallow their pride. Strikers have vehemently opposed many items on which they now will be asked to vote yes. Caterpillar's plan to impose flexible schedules, for instance, will allow the company to work employees more than eight hours daily and on weekends without paying overtime, provided workers don't log more than 40 hours a week.
GAG RULE. The two-tier wage system would start new hires at Caterpillar's parts facilities at wages up to 40% lower than their counterparts. The proposed pact even may prohibit the once ubiquitous anticompany messages that UAW members used to print on their work clothes.
The UAW is getting little in return. The company may offer an early-retirement package for workers with 28 years or more of experience, but even that will work to Caterpillar's advantage. Productivity gains now allow the company to run with nearly 2,000 fewer workers. A generous buyout would allow Cat to retain the 1,100 workers it has hired during the strike and not be overstaffed.
Negotiators still have some thorny issues to hash out. For instance, the UAW is insisting that picket-line crossers shouldn't vote on the contract. Cat disagrees. When everything else is settled, the UAW then must find a way to sell workers on a deal that strikers probably could have had 18 months ago. Both sides seem to be counting on exhaustion to provide enough votes to end one of labor's longest travails.
UNION ON THE RUN
Terms of the contract Caterpillar and the UAW plan to unveil on Nov. 28:
It may be a six-year deal rather than the typical three-year contract
The company can schedule work over weekends without paying overtime
Cat has won the right to move employees to a managed-care plan
The UAW has accepted a two-tier wage for new hires
An early-retirement program will allow disgruntled union members a way to leave gracefully
DATA: BUSINESS WEEKBy Kevin Kelly in Chicago