Workers May Pay the Price in Safeway Sale

The jobs of an unknown number of Safeway’s 11,300 workers in Southern California have been put at risk by the latest financial maneuver of an investment firm that was perhaps overgenerously dubbed a “white knight” last year when it rescued the grocery chain from the clutches of some alleged “greenmailers.”

The impact of the white knight’s rescue effort has been profitable for those who own or manage the company. But, in the long run, consumers may lose. Many workers have already been hurt, and the final damage to them has not yet been calculated.

Congress and the Administration should look closely at the Safeway story to see whether new antitrust laws--or just stricter enforcement of present ones--are needed to help protect consumers and workers when financial giants are playing high-stakes corporate games.

The white knight, Kohlberg Kravis Roberts, is the principal owner of Safeway, and its new maneuver involves selling 172 of its stores in Southern California to Vons Co.


If the government doesn’t block the deal, it should turn out just fine for KKR, since Safeway is getting $325 million in cash for its stores, along with 30% of Vons’ stock, making KKR Vons’ largest stockholder.

And it should turn out fine for Vons’ management and shareholders because the deal would make it California’s biggest supermarket chain.

The only victims of the deal will be those workers who get laid off in a consolidation and consumers who may have to pay higher prices because the acquisition will reduce supermarket competition.

Neither the endangered workers nor the consumers can expect help from President Reagan’s Federal Trade Commission or other regulatory agencies, although the Clayton antitrust law seems pretty clear:


“No corporation shall acquire the whole or any part of the assets of another corporation where . . . the effect may be substantially to lessen competition.”

True, the U.S. Supreme Court ruled in 1966 that Vons had violated antitrust law when it bought just 36 stores from a competitor, Shopping Bag Food Stores, in the late 1950s. Vons was ordered to get rid of the 36 stores, and it did. But those were the days when the nation’s antitrust laws were being rigorously enforced.

The FTC last August did intervene minimally when it required the buyer of 59 Safeway stores in Texas and New Mexico to sell 12 of them to avoid prosecution.

Now, the FTC will automatically review the much larger sale of Safeway stores to Vons. But with the new “mergers-are-not-all-that-bad” attitude of the present Administration, Vons’ acquisition of 172 stores from Safeway isn’t likely to run into the kind of trouble it faced when it bought only 36 stores during the Eisenhower Administration.


More than 8,500 Safeway workers lost their jobs after KKR first moved in last year to save Safeway from the clutches of the father-son team of Herbert H. Haft and Robert M. Haft of Landover, Md.

To protect Safeway from the apparent threat of a hostile takeover, KKR bought it by loading Safeway with a total debt of $5.6 billion. That hefty amount was reduced to about $3.8 billion by selling huge chunks of Safeway assets around the United States and in Britain and Australia.

The first stage of the “rescue” went well, except, for course, for the thousands of Safeway workers who lost their jobs.

The deal made millions for the Hafts and their financial consultants, Drexel Burnham Lambert; for Safeway stockholders; for KKR and its financial consultants, Morgan Stanley, and for a host of bankers, lawyers, accountants and assorted other “consultants.”


However, the Safeway debt incurred to protect it was still enormous. So in comes Vons to buy the Southern California stories that weren’t touched in the initial moves to reduce the massive debt burden, moves that are euphemistically known as restructuring.

Officials of the two companies and of the unions that represent the 20,000 Vons’ workers and the 11,300 Safeway workers in Southern California all say they expect that the latest phase of the Save Safeway operation will not hurt nearly as many Safeway workers as the first phase did.

The companies, particularly, talk about hopes of not only keeping Safeway stores after giving them the name of their new owner, but of expanding some to make room for workers who are laid off in the consolidation.

The unions, primarily the United Food and Commercial Workers and the Teamsters, have generally good relations with both Safeway and Vons and believe that the companies will provide severance pay and other benefits for workers who are zapped by consolidation.


Their primary basis for optimism, though, is that they figure that Vons and its largest stockholder, old white knight KKR, want Vons to grow bigger and bigger, which would mean more jobs for workers--in Vons’ stores.

The trouble with such optimism is that, for it to really work, Vons will have to take customers away from its competitors, and that means fewer workers will be needed in the competitors’ stores--in other words, more layoffs.

That hardly seems a sensible goal for the unions. They can do little to change the situation, however. The real need is for a return to serious enforcement of the nation’s antitrust laws, with modifications by Congress if the present laws are inadequate.

New Tactic at Echlin


The idea of workers and their unions trying to influence management decisions is hardly new, but two unions have developed an ingenious tactic to influence Echlin Inc., a worldwide maker of motor vehicle parts.

The Amalgamated Clothing and Textile Workers, aided by the Carpenters Union, is waging a massive campaign for support among Echlin shareholders to win approval of some resolutions the unions want adopted at the company’s annual meeting Dec. 22 in Branford, Conn., where the company is headquartered.

Echlin management is countering with its own vigorous effort to defeat the union-backed resolutions, the key one of which seems both wise and benign.

The resolution would simply urge the company’s directors “to study the health problems posed to Echlin workers and customers from their exposure to asbestos-containing products, and the potential legal liabilities the company may face from (asbestos-related lawsuits).”


William Patterson, who is leading the union-backed proxy fight to get approval of the resolutions, has the unusual job of “shareholder advocate” for the Amalgamated Clothing and Textile Workers. His assignment is to find common ground between shareholders and workers so that together they can help guide corporate decisions.

Patterson, who is also involved in shareholder action at other companies, says his group has already won significant support for the apparently harmless Echlin resolution from banks, public employee pension funds, large institutional investors and major individual shareholders.

It would seem that Echlin management could use some guidance: The company was recently charged with willful violations of the Occupational Health and Safety Act and, while it paid a $36,000 fine, it has not yet received official clearance from OSHA.

A company spokesman said the unsafe conditions involved were found only in recently acquired subsidiaries of Echlin and that the company moved immediately to correct the problems.


But Patterson says management is moving too slowly, not keeping shareholders informed of progress and that asbestos continues to endanger workers and customers and could mean more costly legal action against Echlin.

The union says its almost exclusive concern is the well-known danger of asbestos and denies that its unionized workers at two small divisions of Echlin are the real motive for its role in the proxy fight, as the company contends.

Patterson said the union learned of the asbestos problems while talking with Echlin workers during its organizing campaign and that “if that knowledge can help the company, workers and consumers, everyone can benefit.”

The union recently won an election to represent some Echlin workers in Lawrence, Mass., but the company is contesting that victory. An Echlin spokesman explained: “We try to stay clear of unions.”


If the union-backed resolutions are adopted next week, Echlin managers may feel obliged to listen to the sensible advice of the resolutions--Caution: Asbestos can be dangerous to both physical and financial health.

And if that common ground between shareholders and workers is established, Echlin may have a more difficult time staying clear of unions.