Cooperative Experiment May Not Be Dead
Nothing is certain in the economic roller-coaster world of the deregulated airline industry, but both the cheers and the moans that accompanied the apparent collapse earlier this year of the exciting worker participation experiment at Eastern Airlines may have been premature--if not totally inappropriate.
Foes of labor-management cooperation did the cheering. Many management executives don’t want to give any significant decision-making power to their employees or to the unions that represent them. They don’t want their roles as bosses to be diminished.
Also, many union officials and workers see “cooperation” as “co-optation,” as a management trick: pretending friendship in order to force the workers to accept wage cuts.
So both of these rival groups were encouraged when the cooperative approach to labor-management relations at Eastern suffered a body blow, because they felt that their own views had been vindicated.
The moans came from those who believe that cooperation is, or should be, the wave of the future in labor-management relations. For instance, the Washington Monthly carried an article titled “Paradise Tossed: How a Chance to Save American Capitalism Was Sabotaged at Eastern.”
But while there is little true cooperation going on now between Eastern’s management and its employees, the key elements of the Eastern experiment are still in place.
The employees still own between 20% and 25% of the company; their four representatives still serve on the company’s board of directors; they continue to have access to all of the firm’s financial data. And Frank Borman, their chief antagonist, is out as Eastern’s chairman.
Thus, while Eastern’s worker participation program faces an uncertain future, it is not dead, even though it seemed to be last February. Here’s why:
When Eastern’s mechanics, represented by the International Assn. of Machinists, refused on Feb. 24 to accept a 20% pay cut demanded by Borman, the airline was sold to Texas Air, headed by the union-busting Frank Lorenzo. That sale was supposed to be the death blow to Eastern’s labor-management cooperation because it was Lorenzo who had used Chapter 11 bankruptcy protection three years ago to get rid of union contracts at Continental Airlines, to cut wages by about 50% and to hire strike-breakers and scabs to replace union workers who refused to accept the cuts. He hardly sounds like a man willing to give a fair trial to Eastern’s system of cooperating with the unions.
Unquestionably, he will seek more cuts in Eastern’s wages and fringe benefits because the company, like 10 of the 12 major U.S. airlines, lost money in the first quarter of this year, according to Airline Economics Inc. of Washington.
Faced with continuing losses, Lorenzo could demand that Eastern workers take the same drastic cuts that he got from Continental workers under the protection of the Chapter 11 bankruptcy. That airline is now in the black, even if the employees are working for half-pay.
However, the bankruptcy laws have changed since he used them at Continental, and the new laws make it difficult, if not impossible, for him to use the same device to break the unions at Eastern. Without that legal protection, a battle between Lorenzo and Eastern’s unions could hurt him as badly as it would the workers.
There are other tactics he might try to permanently eliminate the cooperative experiment at Eastern and the unions there. But a wiser and far more humane move for him would be to reinvigorate Eastern’s worker participation program. While no one knows what the unpredictable Lorenzo will actually do, he might well try the cooperative route.
Former Secretary of Labor William J. Usery Jr., now a labor relations consultant for Eastern, General Motors, Toyota and other major corporations, hopes he will. Usery has not yet been asked by Lorenzo to stay on when Texas Air takes control of Eastern, but there are indications that he may be. If Usery is retained, it will be a good sign that Lorenzo has decided against declaring war on Eastern’s unions.
Usery says he still has to find out if the “new” Eastern wants his services and if it wants to develop a cooperative style of labor-management relations, because he is “totally committed” to that method and will not accept the job if Lorenzo wants to battle the unions.
Obviously, Lorenzo might hire Usery just to throw the unions off guard and then try to eliminate them. But Lorenzo is usually quite blunt about his views of unions and is believed to be unlikely to use such a crude tactic. Usery seems to feel that if he is retained by Lorenzo, it will not be as a trick but in good faith.
When Lorenzo wants to voice his opinion of unions, he does so quite explicitly. Before agreeing to buy Eastern, for instance, when asked for a meeting by a machinists union official, Lorenzo replied that “I don’t talk to union leaders.” If he decides to go to war against Eastern’s union workers, he will probably be just as open. The possibility that he will not do so is increased by the heavy indebtedness of Lorenzo’s holding company, Texas Air. A costly strike at Eastern would cause even more severe problems for Texas Air.
The failure of the cooperative system to work under Borman was not only due to labor’s mistrust of him: Leaders of at least one of Eastern’s unions, the machinists, were and apparently still are suspicious of the concept itself, not just of Borman and Lorenzo.
There was a deep, personal mistrust of Borman by machinists union local leader Charles Bryan, and the feeling was mutual. But the lack of enthusiasm for the new style of labor-management relations extends to the top officers of the union as well.
The union’s vice president, John Peterpaul, says his view of labor relations is usually simple: “You go into bargaining, beat on the table, get all you can for the workers and get out of there.”
But, he acknowledges, there have been “marriages” between management and the machinists at other companies, such as Republic Airlines, and so far they are working.
Eastern’s management and its unions are going through a “separation stage,” Peterpaul says, but he insists “that doesn’t mean we will end up with a divorce. There can be a reconciliation if Lorenzo wants to cooperate with us instead of giving us the shaft.”
Considering his past record, it may seem unlikely, but if Lorenzo tries cooperating with Eastern’s union, and they reciprocate, he could help bring labor peace not only to Eastern but could help set a pattern for the entire airline industry.
Sharing the Misery
Getting workers and management to share the misery of a seriously depressed industry without massive strikes is never easy, but it seems to be happening in the copper industry, where workers are beginning to vote on new contracts that would cut their wages and benefits by more than $5 an hour.
Most of the industry has made what seems to be a sincere attempt to negotiate new agreements with the United Steelworkers. In sharp contrast, three years ago, Phelps Dodge Corp. made what was, in effect, a take-it-or-leave-it offer to the union; as a result, the workers there went out on a long and sometimes violent strike that has never been settled.
Most of the rest of the industry went into serious bargaining with the union, compromises were made, and the workers are beginning to vote this week on whether they will accept the drastic reductions in their contracts.
The union negotiators are not recommending that members accept the pacts, but, on the theory that the industry cannot afford to offer any better agreements, union officials expect the contracts to be approved by the workers. The average worker now earns about $20 an hour in wages and fringe benefits.
There were 38,000 workers in the copper industry as recently as 1981. Today, there are only about 13,500, and the industry continues to lose money because both copper sales and prices are near record lows. The union’s leaders, including Robert J. Petris, co-chairman of the union’s bargaining committee, are acutely aware of the economic troubles in the industry.
If the workers do approve the new proposals, as the economy of the industry dictates, at least most of them, and their union, will be around in three years to try and regain the losses that they will suffer this year.
