United They Don't Stand

Can Glawe and Greenwald heal the rifts at the airline?

Michael H. Glawe is a soft-spoken, cerebral guy. But during the final years of the Vietnam War, he was one of the U.S. Air Force pilots who undertook such gutsy missions as flying American prisoners of war out of Hanoi. In 1975, as Saigon fell, he evacuated a group of injured orphans after their first plane crashed at the edge of the airfield.

Not long after, 11,000 miles away in Venezuela, veteran auto executive Gerald Greenwald was leading the fight to save huge investments by U.S. carmakers from being wiped out by repressive new laws. After staring down the government, Greenwald tripled employment at Ford Motor de Venezuela while doubling market share and upping earnings tenfold in just three years.

Conflicts of a very different sort, to be sure. Yet each man came away with a reputation for steely resolve. Neither brooks much opposition when he believes he's right. Now, Greenwald, chairman and CEO of United Airlines Inc., and Glawe, head of United's Air Line Pilots Assn., are locking horns. And whether these two strong-willed men come to terms will go far toward determining the fate of the world's No.1 airline and its celebrated $5 billion employee stock ownership plan (ESOP).

Tensions have been high since Jan. 16, when United's 8,500 pilots, by an 80% margin, rejected a proposed pay hike of 10% over four years. Afterward, Glawe (rhymes with law) ordered all pilots off employee task teams and decreed that communication between the pilots and United would occur only through him and Greenwald.

"BLINDSIDED." The rift came as a surprise. United is posting record earnings. The pilots, who hold 25% of the stock, backed Greenwald to run a worker-owned United during a failed 1990 buyout attempt and again when the deal went through in 1994. And just a year ago, Greenwald was praising Glawe, 49, for his flexible approach to problem solving.

Greenwald, 61, was referring to Glawe's advocacy of interest-based negotiating, in which each side seeks a result beneficial to both. So when Greenwald took a take-it-or-leave-it attitude on the 10% wage hike, Glawe "was blindsided," says one pilot source. Still, knowing this was the most the pilots could get in arbitration, he sent the offer to a vote without endorsing it.

Now that the rift has been opened, similarities between the two men could keep them at odds. Acquaintances say both are a bit distant--yet are very direct and expect their orders to be followed. For Glawe, that style flows from his upbringing as an Air Force brat and from his years as a West Point cadet. For Greenwald, it reflects 33 years of calling the shots in the auto industry. Soon after Lee A. Iacocca joined Chrysler Corp. in 1978, he brought in Greenwald to assemble a financial package to rescue Detroit's No.3 carmaker. Back then, Greenwald struck some United Auto Workers officials as arrogant, but they couldn't deny his wizardry. One bleak Wednesday, Chrysler's coffers were empty, but by Friday he had the cash to pay 140,000 workers.

Neither man is an autocrat. Glawe embraced "cockpit resource management," which calls for captains to consult their first and second officers on decisions, when other United pilots were resisting it as a threat to their authority. And Greenwald prides himself on the time he spends listening to employees.

Both have seen what happens when management and labor are unable to get along. After a four-year furlough brought on by recession, Glawe returned to flying for United just before a pilots' strike in 1985. "It created a tremendous amount of distrust and disharmony," he recalls. Greenwald had a conversion experience of another sort: His Chrysler rescue succeeded only because workers accepted wage concessions in return for a board seat and stock. But he learned then that "sometimes you'll take two steps forward and one step back," he says. Improving the culture of the company "took years at Chrysler."

HARDBALL. At United, conflicting expectations are part of the problem. Greenwald thought United's soaring stock price--up 170% since the buyout--would assuage pilots' desire for a pay hike. He underestimated their resentment about cuts they took when the ESOP was negotiated, and he hurt their pride with his hardball tactics. For their part, the pilots expected to share in the spoils of United's two great years without much concern for investor reaction. Greenwald chooses to see such frustration as progress. "Two years ago, 75,000 employees of this company were worried about their jobs," he says. "Now, 84,000 employees are concerned, even upset, that they're not enjoying the full fruits of their labors."

Patching things up won't be easy. The pay dispute is in binding arbitration, with a ruling due on Apr. 30. But Glawe says he's worried about what will happen in 2000, after employees have received all their stock. Although the ESOP contract doesn't allow for wages to "snap back" to preconcession levels, pilots are demanding that their pay be restored. Greenwald says overall compensation--including the value of stock--should be "competitive." But the issues go beyond money. Glawe claims "there's a deep undercurrent of disaffection" about the pace of cultural change. "If we have to provide leadership," he says, "we can do that. That's what I trained for at West Point."

There are some positive signs. Greenwald is calling for a "culture convention" in early March to air grievances and find ways to make United more employee-friendly--a conciliatory response that surprises some on Wall Street. "I can't imagine what [American Airlines Chairman Robert L.] Crandall would say in this situation. It would be unprintable," says Dillon, Read & Co. analyst John V. Pincavage. Glawe, too, is sounding a positive note: "We have not abandoned the ESOP," he says. What Bob Crandall would do doesn't matter. It's Greenwald and Glawe who must find a way to put this suddenly troubled ESOP back together again.

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