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July 2012, Week 4

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Wed, 25 Jul 2012 20:11:15 -0400
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At Caterpillar, Pressing Labor While Business Booms
By STEVEN GREENHOUSE
Published: July 22, 2012
http://www.nytimes.com/2012/07/23/business/profitable-caterpillar-pushes-workers-for-steep-cuts.html?pagewanted=all

JOLIET, Ill. -- When it comes to dealing with labor
unions, Caterpillar has long taken a stance as tough as
the bulldozers and backhoes that have burnished its
global reputation. Be it two-tier wage scales or higher
worker contributions for health insurance, the company
has been a leader in devising new ways to cut labor
costs, with other manufacturers often imitating its
strategies.

Now, in what has become a test case in American labor
relations, Caterpillar is trying to pioneer new
territory, seeking steep concessions from its workers
even when business is booming.

Despite earning a record $4.9 billion profit last year
and projecting even better results for 2012, the company
is insisting on a six-year wage freeze and a pension
freeze for most of the 780 production workers at its
factory here. Caterpillar says it needs to keep its
labor costs down to ensure its future competitiveness.

The company's stance has angered the workers, who went
on strike 12 weeks ago. "Considering the offer they gave
us, it's a strike we had to have," said Albert Williams,
a 19-year Caterpillar employee, as he picketed in
99-degree heat outside the plant, which makes hydraulic
parts and systems essential for much of the company's
earth-moving machinery.

Caterpillar, which has significantly raised its
executives' compensation because of its strong profits,
defended its demands, saying many unionized workers were
paid well above market rates. To run the factory during
the strike, the company is using replacement workers,
managers and a few union members who have crossed the
picket line.

The showdown, which has no end in sight, is being
closely watched by corporations and unions across the
country because it involves two often uncompromising
antagonists -- Caterpillar and the International
Association of Machinists -- that have figured in many
high-stakes labor battles.

"Caterpillar has been a leader in the past 20 years in
taking a hard line," said Richard Hurd, a professor of
industrial relations at Cornell. Last winter,
Caterpillar locked out about 450 workers at its
locomotive plant in London, Ontario, and then closed the
factory after the union rejected its demand to cut wages
by 55 percent. In the mid-1990s, the company vanquished
the United Automobile Workers after a 17-month strike by
9,000 workers at eight factories; the union surrendered
and accepted the company's concession-filled offer.

The machinists have carried out largely successful
strikes at Boeing and Lockheed Martin, ultimately
winning better raises and benefits for thousands of
members.

Robert Bruno, a labor relations professor at the
University of Illinois, said Caterpillar was trying to
drive compensation down to a new floor. "Caterpillar
sees this as 'the new normal,' while this union local
feels you have to draw a line in the sand to hold on,"
he said. "Some people are saying the union should be
more deferential, more compliant, that it's a bad time
to strike. How can you counter a powerful multinational
in this economy?"

The current showdown is playing out on a flat stretch
along Channahon Road here, 40 miles southwest of
Chicago, where 15 strikers stand at the plant entrance
during each four-hour picketing shift, with signs
saying, "Fighting for Our Children's Future" and "I Am
Solidarity." The strikers often shout "scab" as
replacement workers drive into the factory.

Ever since negotiations began in March, Caterpillar has
insisted on a wage freeze for its top-tier workers,
those employed seven years or more; they average $26 an
hour, or $55,000 a year before overtime. For the junior
third of the workers who typically earn $12 to $19 an
hour, Caterpillar has made no promises but has suggested
it might raise their wages based on local market
conditions.

Caterpillar has offered workers several modest, one-time
payments, but is also demanding far higher health care
contributions from its workers, up to $1,900 a year
more, according to the union. The company had profit of
$39,000 per employee last year.

Carlos Revilla, the plant's operations manager, defended
the push for a pay freeze, saying the top-tier workers
were paid 34 percent above market level.

"A competitive and fair wage package is a must," he said
in a statement. "Paying wages well above market levels
makes Joliet uncompetitive."

But the union says Caterpillar, the world's largest
producer of earth-moving equipment, is in no way
uncompetitive and should be sharing its prosperity with
its workers.

"A company that earned a record $4.9 billion in 2011 and
$1.586 billion in the first quarter of this year should
be willing to help the workers who made those profits
for them," said Timothy O'Brien, president of Machinists
Local Lodge 851, which represents the strikers.
"Caterpillar believes in helping the very rich, but what
they're doing would help eliminate the middle class."

He said the company wants a pay and pension freeze for
longtime workers to push them into retirement and
replace them with $13-an-hour workers.

Michael LeRoy, another labor relations professor at the
University of Illinois, said Caterpillar has served as a
model in legitimizing tough labor strategies, like
take-it-or-leave-it contract offers.

Detroit's automakers, for example, followed
Caterpillar's lead in adopting a two-tier wage system,
lengthy contracts and a special health care trust fund
for retirees, although "it took a bankruptcy to do it,"
said Sean McAlinden, chief economist at the Center for
Automotive Research.

Rusty Dunn, a Caterpillar spokesman, said the philosophy
of paying market-based wages would help Caterpillar
"keep competitive when times are bad."

"We think the overall approach will preserve job growth
in Illinois and the U.S.," he said. Caterpillar has
added about 6,500 jobs in the United States over the
past year.

The strikers here exude an unusual defiance and pride,
boasting that the hydraulic parts they produce require
some of the most exacting specifications in heavy
manufacturing.

"We make an excellent product here, a product that
Caterpillar uses in all its vehicles," said Mr.
Williams, a machinery repairman. "That gives us a
leverage that the other plants don't have."

Yet he admits to feeling financial pain. He receives
$150 a week in strike benefits, and he said he did not
have the $40 needed for his 11-year-old son to play
Little League.

The Joliet strikers hope Caterpillar will soon sweeten
its offer after concluding that it needs the strikers
back to produce vital components.

Caterpillar says that is unlikely.

"We believe we have exhausted the negotiating process,"
Mr. Dunn said. "The primary strategy, going forward, is
to run the plant with the contingent work force as long
as the work stoppage continues."

He added that Caterpillar's offer was "competitive,
reasonable and fair."

Rose Bain, a striker, grows impatient with such
arguments. Earning $15 an hour after two years, she said
she could not afford a six-year freeze and did not trust
Caterpillar to follow through with the hinted raise for
lower-paid workers.

"We're the people who busted our butts to help them make
record profits," she said. "We shouldn't be treated like
this."

____________________________________________

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