Caterpillar and Union in Battle Over Principles
Long the nation’s benchmark for averageness, this shot-and-a-beer river town is now at the center of a workplace battle that could have ominous overtones for the future of organized labor.
In a throwback to the kind of bitter, mulish contract disputes more common to a bygone era, a strike by the United Auto Workers union against Peoria-based Caterpillar Inc. is in its fifth month with no settlement in sight.
But the standoff now idling about 10,600 workers at Caterpillar, the world’s leading construction equipment manufacturer, differs from strikes past because it is less about pay or perks than about principle, and that has hardened resolve on both sides.
“This isn’t about wages and this isn’t about health insurance,” explained striker Bob Teague, 42, who has endured three earlier strikes during his 20-year career on the assembly line. “It’s about our life.”
The company--referred to by its employees with a mixture of awe and derision as “the Big Yellow God”--insists it needs more workplace flexibility to remain competitive in an increasingly global marketplace.
It has offered modest raises and job-security pledges, but also wants to tinker with seniority rules and other heretofore inviolate contract guarantees. In addition, it is seeking a two-tier wage scale that would pay some new hires substantially less than their co-workers. Such notions are a red flag to union firebrands.
The UAW claims that Caterpillar’s promises are full of tricks and loopholes that, in the long run, would erode workers’ rights and benefits. Strikers say the company proposal is designed to break the union and rationalize the eventual shift of its manufacturing facilities to overseas sites with cheap labor.
Not surprisingly, each side accuses the other of lying and offers dire predictions and warnings that can’t be proved. What is clear to some analysts, however, is that the clash could foreshadow a new generation of workplace friction as organized labor resists what its leaders see as an assault on union clout.
If Caterpillar wins, says industrial restructuring expert Harley Shaiken, other large manufacturers may try to recast their own collective bargaining arrangements in terms of foreign rather than domestic competitors.
“Carried out more broadly, it would exert a very severe downward pressure on wages in the U.S. because ultimately you’d be competing not simply against the Japanese but against the Koreans and the Brazilians and the Mexicans in terms of wage rates,” contends Shaiken, a visiting professor at the Institute of Industrial Relations at UC Berkeley.
To appreciate the stakes here, it is necessary to delve into the traditions of collective bargaining as well as the nature of the company.
At the center of union concerns is pattern bargaining--the practice of targeting a single manufacturer in an industry when contracts come due, then letting whatever is negotiated set the pattern for the industry as competitors quickly agree to similar pacts.
In essence, pattern bargaining has become a kind of code phrase for a social contract between management and labor. It has bound companies to compete on the basis of productivity, quality or innovation, not by trying to see who could hammer labor costs down the lowest.
Unions have agreed to deviate from the formula from time to time, but only in such cases as Chrysler, the auto maker which a decade ago needed special concessions to survive. Caterpillar, however, is not a Chrysler-type corporate basket case. It is one of the few survivors of a once-crowded domestic farm and construction implement field that boasted now-vanishing nameplates like International Harvester and Allis-Chalmers.
Until the recession last year, when the company had $10 billion in revenues but lost more than $400 million, Caterpillar was a consistent money-maker. And, because it is blessed with a technologically sophisticated line of tractors, excavators and loaders and a worldwide reputation for top quality, industry analysts expect the firm’s fortunes eventually to rebound.
But after decades of following the pattern bargaining concept, Caterpillar is now proposing to junk it. Essentially, the company wants to decouple its UAW contract from the arrangements worked out by the union with Deere & Co. and other implement makers. From the UAW’s point of view, such a development would spell disaster by creating pressure for Moline, Ill.-based Deere and others to bid down wages and benefits in order to stay competitive.
“If we settle with Caterpillar for less than we got with Deere, I think Deere would raise hell with the union,” said Douglas Fraser, the former UAW president and now a professor of Labor Studies at Wayne State University in Detroit.
Caterpillar maintains that its offer isn’t less than Deere’s, just different because the two companies offer vastly different products. These days, according to company spokesman Gil Nolde, nearly 60% of sales are generated overseas, and Caterpillar’s main rivals have become European firms and Komatsu, the Japanese construction equipment giant.
“We want to get a contract that continues to be competitive globally,” said Nolde. “We’re looking at constant change in customer demand. The world is different. We’re not trying to fight a philosophical war.”
Critics in the UAW scoff at that, arguing that Caterpillar gave off broad hints it was spoiling for a confrontation months before negotiations were even set to begin on a contract to replace the one that expired last October. More than a year ago, for example, management began placing ads in local media warning that the community could face a significant loss of jobs and revenue should Caterpillar remain saddled with an unrealistic contract.
The strike itself didn’t begin until early November. Initially, it was confined to a few thousand workers at two key assembly facilities.
Within days, the firm retaliated by locking out thousands more UAW members from other plants in the Peoria area and elsewhere in the state.
At last count, the ranks of the strikers had grown to 10,600, about two-thirds of the company’s blue-collar work force in Illinois. Though management personnel are trying to keep production running, the walkout has clearly crippled the manufacturing capability of Caterpillar, Illinois’ largest private employer and one of the nation’s leading foreign export revenue earners.
Over the months, there have been only a few, brief negotiating sessions. The most recent one lasted only minutes but the two sides are now trying to agree on a resumption of talks this week.
If anything, the mood has gotten uglier in recent weeks. The company won a court injunction to limit the number of picketers at each plant gate and hired a private security force to watch the strikers. UAW officials called it a squad of “rent-a-thugs” designed to incite violence, not thwart it. Then, a few days ago, Caterpillar unilaterally declared the talks at an impasse, a legalism that under federal law could pave the way for the firm to impose its own contract settlement and hire replacement workers.
No such move has as yet been attempted, but discarding a highly skilled work force could carry considerable risk for the company by jeopardizing its reputation for producing high quality goods.
Caterpillar is no stranger to labor strife. UAW workers struck the company three times between 1976 and 1982, the final walkout lasting 205 days--still a UAW record against a major American manufacturer. That conflict, coupled with the grinding recession that raked the rust belt and the farm economy in the early 1980s, forced the company into a major downsizing.
Since then, in central Illinois, the heart of Caterpillar’s U.S. operations, blue-collar and white-collar payrolls have shrunk from 36,000 to around 22,000 today. Membership in UAW local 974, representing Caterpillar workers in the Peoria metropolitan area, has been halved in only a decade.
Just how much the current strike is hurting is difficult to gauge. Diane Swonk, regional economist for First Chicago Bank, blamed the dispute for adding up to two percentage points to the Illinois unemployment rate late last year, nudging the state into a nationwide recession it had largely escaped.
“There’s no question how much (the) Illinois (economy) seemed to simultaneously fall apart right around that strike,” Swonk said. She said many of Caterpillar’s suppliers had been forced to lay off workers. One trucking firm that serviced Caterpillar plants went belly-up last month.
As a whole, however, the Peoria area appears to be weathering the strike better than might be expected. Unemployment is hovering around 9%, higher than the 5.3% recorded before the strike but considerably lower than the horrendous 17.5% the region endured in the recessionary aftereffects of the marathon 1982 walkout.
The impact of the present strike has been muted somewhat by the local community’s reaction to the last one and the hard times that accompanied it, according to Bernard Goiten, director of the school’s Center for Business and Economic Research.
To counteract a mass exodus of both jobs and people during much of the 1980s, community leaders mounted a major and successful drive to lure new industries and diversify the economy. In almost a blueprint of the Reagan economic revolution, the Peoria area today boasts thousands of new service jobs in areas like health care and telemarketing. The development means more and steadier paychecks, but ones that are also considerably thinner than the $30,000 to $40,000-a-year and up that better-paid Caterpillar employees get.
More than any short term economic pain, city fathers are worried that the strike could choke off efforts to lure new employers. “This really sets back our national image, being thought of as a bad labor town,” griped James Dittoe, president of the Peoria Economic Development Council.
Up to now, many strikers have been able to ride out the situation without too much distress. Soup kitchens and UAW-sponsored food and financial-aid programs have reported an upsurge in requests for help, but have not been overwhelmed.
The moment he saw the first Caterpillar newspaper ad more than a year ago, 18-year veteran John Backes started socking away $50 to $100 a week into his own personal strike fund. Backes, whose wife works as an X-ray technician, has chopped frills out of the family budget. The strike notwithstanding, he’s proceeding with plans to buy a new house.
Things have been harder on welder Cliff Durst, who supports four children, his mother, a 16-year-old nephew and his wife, Laurie. Durst was heading out the door to do his turn at picket duty the other day when Laurie stunned him with the declaration that she wanted a divorce. That was quickly rescinded, but both admit things are shaky.
“There’s eight of us living on $100 a week, period,” complained Laurie. “All we do is eat, period. There’s no bills being paid.”
As in any strike, the ultimate question is which side will crack first--the company, which is losing revenue, or workers like Durst who could lose much more. Some strikers, admittedly a minority, say they’re getting frustrated with both sides.
Richard Owens, a transmission gear assembler with 18 years at Caterpillar, said neither management nor union leaders have been forthcoming about their positions. Owens said he feared that Caterpillar workers were being used as pawns by UAW officials in Detroit who think a compromise on pattern bargaining here would open the floodgates to similar demands from debt-racked General Motors when it opens contract talks next year.
But Bob Teague, the 20-year worker who delivers parts from plant site to plant site, insisted that Caterpillar’s tactics had so enraged his fellow union members that they’d fight the company to the death. “It’s like a dog,” Teague explained. “You kick him enough times, and by God one of these days he’s going to tear your leg off. We’re not trying to tear Caterpillar’s leg off. We know they have to make a profit. But we just want our fair share.”
Researcher Tracy Shryer in Chicago contributed to this story.
Labor Standoff’s Two Foes
A five-month strike has pitted the powerful United Auto Workers union against Caterpillar Inc., the world’s leading construction equipment manufacturer:
Caterpillar at a Glance
Headquarters: Peoria, Ill.
Products: World’s leading manufacturer of earthmoving and heavy construction equipment. Also produces industrial machinery engines and operates a financial services subsidiary.
1991 1990 Worldwide revenues: $10.2 billion $11.4 billion Profit or loss: -$404 million $210 million U.S. work force: 38,669 40,895 Foreign work force: 14,967 17,553 Sales abroad: $5.8 billion $6.1 billion (59% of total) (55% of total)
UAW at a Glance
* Represents: 16,000 active and 2,400 laid-off workers at Caterpillar plants in Illinois, Pennsylvania, Colorado and Tennessee.
* Strike began: November 3, 1991.
* Presently on strike: 10,600 members, all in Illinois.
Sources: Caterpillar Inc., United Auto Workers
