Caterpillar Seeks Steep Concessions from Its Workers Even When Business is Booming

In January 2009, Caterpillar announced that it would slash 22,000 people from its 112,000-person workforce. The new round of job cuts spanned five plants in Illinois, Indiana and Georgia. Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. At a Caterpillar Inc. plant in Peoria, Ill., President Obama said that his proposed economic stimulus would allow the company's CEO to rehire some of the 20,000 recently laid-off employees. But when asked on February 12, 2009, if the stimulus could do that, Caterpillar CEO James Owens said, "I think, realistically, no. The honest reality is we're probably going to have more layoffs before we start hiring again." More than half of the 15,000 people that Caterpillar Inc. hired in 2010 were outside the U.S. Also in 2010, Caterpillar made plans to build its second factory in China. Legislators have been bleeding the next two generations of Americans dry by pouring money into corporations that are building in overseas locations to avoid paying taxes. On January 26, 2012, Caterpillar reported a 58 percent rise in quarterly earnings; the results capped a record 2011 in terms of sales and profits. The company is enjoying solid growth in its resource-equipment sector due to solid demand and favorable prices in the commodities markets. [Source]

At Caterpillar, Pressing Labor for Concessions

July 23, 2012

New York Times - 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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