For Now, The Uaw Can't Keep Cat From Purring

About 150 strikers are on the picket line one recent morning outside Caterpillar Inc.'s Aurora (Ill.) manufacturing facility. Mainly middle-aged men, they whistle and yell "scab" at cars and buses carrying temporary replacement workers through the gates. But many worry that their battle with the construction equipment giant has been overshadowed by the baseball strike. Says one picketer: "Heck, it's all we talk about out here ourselves."

Call it the forgotten strike. Across the country, 10,500 Caterpillar employees continue to hoist picket signs, while 4,000 of their brethren have returned to work. The dispute over management's firing of union members, which many expected to end shortly after its late June start, now looks likely to last. The United Auto Workers strengthened its strikers' resolve by tripling monthly strike pay to $1,200 in early August. And Cat has kept most of its factories humming with a ragtag band of UAW returnees and office workers, along with temporary and permanent new employees. Says University of California at Berkeley labor economist Harley Shaiken: "This strike has entered a long-term phase."

A GAME OF CHICKEN. But how long can both sides hold out? "One day longer than Caterpillar," vows UAW Local 145 President John Paul Yarbrough. Indeed, many striking workers, living in smaller cities and semirural areas, can easily pay their bills with their increased strike pay. And the union's $1 billion strike fund means it can keep paying benefits almost indefinitely, if it chooses. UAW officials expect inventories to run out in the fourth quarter, shellacking Caterpillar's bottom line.

Not so, says Caterpillar. Although the company admits few workers have crossed the picket line in recent weeks, it hopes for a flood of defectors after it announces third-quarter results in early October--the first financials that will reflect the impact of the strike. Smith Barney Shearson Inc. analyst Tobias M. Levkovich predicts the company will earn $148 million, up 12% from last year, on sales of $2.9 billion (chart). He thinks Cat could hold out for at least six to nine more months before the strike begins to pinch.

Certainly, Caterpillar looks to be holding its own so far. When the strike started on June 21, the company immediately shifted 6,000 office workers--many of whom had gained factory experience in a 1992 strike--into its plants. Cat initially concentrated on cranking up production at its components facilities such as its heavy-duty engine plant in Mossville, Ill. Now it says parts production is at normal levels, and many of the office workers are back at their regular jobs. One factory employee says that's thanks to 1,000 UAW line-crossers, more than 500 new hires, and office workers, who logged 16-hour days early in the strike.

To get overall production humming again, Cat has repeated the tactics elsewhere. At its East Peoria (Ill.) transmission plant, 40% of the UAW workforce is back, says a shop-floor employee, and production is back to prestrike levels. At the tractor plant next door, where 45% of the workforce has returned, "it's going as well as Caterpillar says it is," says one employee. Caterpillar officials predict all plants will be producing at 100% of prestrike levels by Oct. 1.

That might be a stretch. The company still faces big difficulties at its mining equipment facility in Decatur, Ill., where less than 10% of workers crossed the picket line, and at its York (Pa.) parts operation, where only 15% have gone back to work. But Caterpillar is hiring temporary help and in some cases has borrowed skilled workers from its


WALKING A TIGHTROPE. So far, dealers and customers haven't seen major problems. James L. Hebe, president of truck manufacturer Freightliner Corp., says there haven't been any delays in Cat engine deliveries--or any falloff in quality. And one large dealer says he hasn't had any delays either, though he feels quality has suffered since the strike.

Nobody thinks Caterpillar can keep this makeshift system going forever. The company has had to shift workers from key areas like new product development to the assembly line. "You can't do that too long, or product will get stale," admits one line-crosser.

But neither Cat nor the union seems likely to cave in anytime soon. And Cat's hiring of temps "only adds to the bitterness," says Shaiken. As this strike drags on, the jeers and jibes at Cat's plant gates are going to get ever more pointed.

Before it's here, it's on the Bloomberg Terminal.