If Eastern Pact Works, It Could Become Model

The intriguing labor-relations experiment designed to bring Eastern Airlines’ workers and managers together to save the economically troubled company is proving to be as difficult and tempestuous as a troubled love affair.

But if successful, the plan should be a model of labor-management marriages and speed up the still extremely limited movement toward worker representation on corporate boards of directors.

Just five years ago, in an unprecedented move, Chrysler Corp. executives put Douglas Fraser, then president of the United Auto Workers, on its board. Since then, workers have become board members at several airlines, including Eastern, Pan American, Western and PSA; six major trucking companies, and a number of smaller firms, particularly among the estimated 5,000 companies that have Employee Stock Ownership Plans.

Eastern has had a history of late of raucous labor relations. The threat a year ago that Eastern might go bankrupt led to an agreement that workers would take a one-year wage cut of up to 18% in return for 25% of the company’s stock and four seats on the 19-member board, an aspect that attracted widespread attention.

For a time, the idea seemed to work. Both labor and management boasted of good prospects for turning Eastern into a profit maker.

Then, at the end of December, the period of mutual admiration ended, after Eastern Chairman Frank Borman decided unilaterally to leave in place an 18% pay cut for Eastern’s 37,000 workers, even though the agreement authorizing the cut had expired.

Charles Bryan, head of the International Assn. of Machinists’ District 100, which represents Eastern’s 12,500 mechanics, denounced Borman as a man “who just can’t be trusted to keep his word.” A former Eastern mechanic who worked his way to a top post in the union and was named an Eastern director, Bryan called Borman’s decision a “treacherous betrayal.”

On the other hand, Borman, a former astronaut, attacked the union leaders, saying they didn’t seem to understand the urgent need to maintain the pay cut so that Eastern could get creditors to extend their loans. The company’s survival was at stake, he contended.

A new crisis was at hand. Eastern was faced with creditors demanding stability in the company’s labor relations and clear-cut evidence of productivity increases. The company called on former Labor Secretary Bill Usery for counseling. The machinists asked for help from their expert in such matters, Randy Barber.

The result: an agreement that the company would restore the wages and repay an estimated $22 million in paycheck reductions made since Dec. 31. The two sides also agreed to sit down together to try to restore harmony.

One factor that might help bring about a new agreement is that workers are represented on the board. That means they know firsthand about the company’s financial troubles. (On Tuesday, the company reported improved results for the fourth quarter and 1984. Net income in the quarter was $10.7 million, compared to a loss of $54.8 million in the same period the year before. For 1984, the loss was $37.9 million, compared to a loss of $183.7 million in 1983.)

Giving workers full access to financial records can help smooth labor relations. Workers who know the true extent of a company’s problems are more likely to try to help solve them. Such knowledge can reduce the suspicion many workers have that, at times, corporate executives demand sacrifices from workers only to increase already healthy profits and their own salaries.

For example, a major problem in last year’s strike at Disneyland was management’s demand that workers take pay cuts. Management cited a drop in attendance at the park but did not provide details about earnings to the workers.

The strike ended when workers accepted a wage freeze. Later, the parent company, Walt Disney Productions, reported record profits, and some of its executives were given hefty bonuses and salaries.

Union officials said last week that resentment lingers among the park’s employees.

Could that strike have been averted if the union had had access to the company’s non-public financial records? Perhaps, Usery says.

Having workers on boards of directors involves more than just getting some “inside” information about the company.

Bryan, the machinists’ board member at Eastern, said he and the other worker representatives on the board are trying to help devise a business plan for 1985 that should enable Eastern to continue receiving the loans it needs, increase productivity, make some profit and ensure that employees are treated fairly.

“We (union and management members of the board) must weigh all of the company’s options and come up with the one that is most fair and reasonable. In the past, Borman’s ideas for helping the company have been just to cut wages,” Bryan said.

While some management officials may resent the presence of worker representatives on the board, Bryan said, most Eastern directors say they “appreciate having someone there with real in-the-trenches knowledge of the airline business.”

The problems that airline employers and managers face result in large part from deregulation, which has allowed non-union airlines to start operating and pick off some choice routes while paying workers far less than union members.

“I pray we will never have to bring the pay of Eastern’s workers down to the level of non-union companies like Continental in order to compete with them,” Usery said. Eastern’s pilots, for example, make close to $100,000 a year, compared to $46,000 for those at Continental, which abrogated its own union contracts.

Eastern, Usery said, can compete with the non-union airlines by increasing workers’ efficiency and dedication and providing better, more reliable service.

Those are goals that should have a much better chance of success now that Eastern’s workers have a 25% stake in ownership and a meaningful voice in running the company.

Big Test for Presser

Teamsters President Jackie Presser’s first try at negotiating a nationwide contract for about 170,000 workers in the trucking industry will begin in earnest next Tuesday in Washington, with good prospects for a peaceful settlement.

At an initial meeting Jan. 15 between the union and Trucking Management Inc., the industry’s major national collective-bargaining arm, the two sides did not exchange any formal demands.

The negotiations that will start next week will be a major test for Presser, who took office in April, 1983, after the current contract had been completed.

Major concessions were made by the union in that contract. While the industry is still having economic troubles, Presser could face a rebellion by members if he agrees to any further substantial concessions. (In fact, Presser suffered a blow to his prestige with members in 1983, when the industry requested and he agreed to some mid-contract concessions, including a two-tier wage structure. The members voted that down by a whopping margin of 94,000 to 13,000.)

The last contract resulted in, among other things, a three-year basic wage freeze and a decision to use the 68 cents generated by a cost-of-living clause to pay for increases in medical costs.

The union’s concessions were made because the trucking industry was suffering heavy financial losses and an estimated 70,000 truckers had been laid off.

Industry and union sources say management is expected to offer some kind of a pay increase this time. However, they add that there might be a protracted argument over an expected renewal of a management demand for a two-tier wage system that would entail maintaining a permanent wage differential for workers hired after the contract goes into effect.

Ken Paff, organizer of Teamsters for a Democratic Union, an 8,000-member dissident group, predicts that the rank and file would overwhelmingly reject a two-tier wage system.

Trucking Management Inc. will represent only 36 member companies this year, compared to 284 in 1982 and more than 400 in 1979. Bankruptcies and mergers were primarily responsible for the sharp reduction in the number of companies using the bargaining arm. But many other companies simply decided to negotiate their own contracts, while many others went non-union.

However, Trucking Management is still the major voice of management, since its member companies generate about 60% of all revenue produced by the industry.

Presser has reportedly decided that any agreement will be the only pattern used to get settlements with the rest of the industry.