Are We Entering a Period of Labor Unrest?

The International Association of Machinists and Aerospace Workers is involved in two significant high-profile strikes this week – at Caterpillar in Joliet, Illinois, and Hawker-Beechcraft in Wichita, Kansas. The situations are quite different, with Cat making record profits and Hawker on the cusp of bankruptcy with its finances controlled by a cadre of Hedge Funds – but the workers feel they are being abused in both places.

Cat is asking for a 6-year wage freeze for the striking workers, who do not comprise a majority of the Joliet workforce. Caterpillar can keep the plant going without the striking workers. The strike is interesting to me because Cat is expanding production in the U.S. now and building new plants. It has had relative labor peace since the awful Peoria war 10 years ago with the UAW, which set the stage for the tremendous profit growth in recent years. But it left lingering resentment between the workers who were entrenched and those whose contracts were not grandfathered. In Joliet we are seeing union anger play out as Cat uses its financial and manufacturing muscle emanating from its foreign plants and new non-union plants to undermine union workers at factories like Joliet.

The anger is understandable, with the Joliet workers seeing the company doing so well yet offering no wage increases and reduced health care benefits for the next six years. Meanwhile, Cat knows it can move the work to South Carolina or Texas where labor costs will be significantly lower than in Joliet, Illinois.

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In Wichita you have a weak company in Hawker-Beechcraft, which will be going into Chapter 11 bankruptcy imminently, while the workers are trying to position themselves in the next iteration of the struggling company, which was mated by Goldman Sachs in 2007 – perfect timing for disaster.

As often is the case when manufacturing companies are run by investment guys to score a quick killing – very bad things happen. Hawker-Beechcraft is getting slaughtered by Cessna these days, and the private aviation business is mediocre. Defense buying is also down.

On the other hand, while Caterpillar could move production to other facilities relatively easily, Wichita is the mecca of small plane building, and a new plant would require big investment and expensive training. This is a case where union and management are stuck with each other. Unfortunately, the key players in this deal are the hedge fund guys who control the crappy debt of Hawker. They are evidently going to swap debt for equity in the bankrupt company and then hammer the workers for concessions. The union can make life miserable for the new owners, which they are making clear by striking while the lawyers are dividing the pie. Meanwhile, if you were shopping for a private jet these days, you probably would not buy Hawker-Beechcraft’s offerings.

For the last several years we have been living in relative business-labor tranquility. These two machinist strikes in progress may auger in a period of more unrest, particularly with China a less attractive alternative. The high unemployment rate will theoretically mitigate labor contention, but the reality may be more volatility in the machining and machinery environment.

Question: What would you do if Caterpillar cut your benefits and froze your wages for six years?

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29 thoughts on “Are We Entering a Period of Labor Unrest?

  1. lulu

    I’m sure I would feel outraged and resent the company for proposing such a thing, but ultimately I’d be thankful I’m still employed. I would also start job hunting to see what else is out there before I ever voted to strike and risk losing my job. There are highly educated people sitting on the unemployment line right now or working minimum wage jobs.

     
  2. Jerry Johnson

    Be happy I still had a job, go to college or a trade school, and get promoted to a higher paying position with more benefits.

    Or…………..join the Occupy Wall Street “movement” and sit around pissing and moaning, looking for a free handout while the world passes by.

     
  3. Joe Leslein

    I agree with other posters, with an added observation (which I wrestle with once in awhile)—the word “entitlements”. I’ve seen it in 2 companies I’ve worked at, where somehow complacency creeps in with tenure, and workers feel they’re entitled to more, when they may actually be coasting a bit in their performance. “Well I’ve been here “X” amount of time, I deserve a better shake”. It’s so easy to forget how crappy it may be elsewhere, or was at a previous gig.

     
  4. Russ

    Great Question Lloyd. If my skill set was worth more money at another company I would leave or start looking for other jobs. If I was fairly compensated even with the cuts and freezes I would continue to work. Either way, striking and complaining will do very little to solve the problem. If the union things it is strong enough to bully the company I would immediately start looking for other jobs, because that plant will be closing in the future.

     
  5. Mike

    I’m not familar with the Peoria wars a decade back, but it sounds to me from your article that the union took wage concessions back then. If that is the case, it’s an insult for the workers when Cat is at or near record profits, no matter which way you look at it. Unions for the most, has always received a bad wrap but corporate greed has mostly been alive and well. In todays age it thrives. In 82′ while still in high school, I worked for a machine shop just a stones throw from the McDonough St plant. Things were busy.
    As a business owner today I see no problem with sharing the wealth. Most todays corporate honchos see it differently. Sad

     
  6. Ron

    After being in a union for 20 years I finally broke out of their stifling grip and now am able to enjoy a great job free of their mentality, a job where I can create my own opportunities, which I have done. Unions are a cancer to progressive thinking.

     
  7. Steve

    Sure, I’d feel dissed about it – most anyone would. But take a look at the general economy and the job market in particular; perhaps Cat machinists make enough now to survive a six-year period of steady employment with no raises with the alternative being jobless benefits and a continual job hunt. Both sides of the issue have to be weighed.

     
  8. Delmar Hauff

    As the owner of a small machine shop I would say good for Cat. Cat most likely follows the same economic trends that I do. I have had years of loss that are equal to my years of gain and you have to have cash reserves to make up for the bad years. Cat probably needs 6 years of gain to make up for the last 3 years of loss, which is my case anyway.

     
  9. Nick Bloom

    Settling on fair terms is in the interest of management, the union and CAT and Hawker customers. Sure, the union and management can flex their muscles or try to outmaneuver the other side. On the other hand, giving too much is also a bad idea as demonstrated by the long steady decline of the U.S. auto industry. (Business won’t always be good, so a cooperative approach in good and bad times is essential.) There is no more important role in maintaining good long term management-worker-customer interests than knowledgeable, good-faith negotiators for all sides. Too often in negotiations both sides fail to lay all the short and long term issues on the table and ignore the potential implications of risk and uncertainty, resulting in bad deals, resentment, and unnecessary turmoil.

     
  10. Mark

    Lloyd those guys in the picture look like fools. When will American workers, especially those that are unionized, realize that the good ole USA is no longer an island like it once was. There was a time when the world needed everything that we mined, machined and made. It’s over, the scales tipped out of our favor long ago guarantees and entitlements are gone period. CAT, just like every other multinational, is in the business of making money regardless of whether the corporate office is in Illinois or Bangladesh. My suggestion would be to go back to your job and be thankful give thanks for your freedom, family, home, car, boat, health care, 401K, police, firemen, military, education, food, water, medicine etc. because for every guy on strike there are hundreds sleeping in cardboard boxes around the world that will happily run your CNC lathe for a plate of food and cup of water. Then again maybe these strikers should start a new company and call it Union Earth Moving then they could do what ever they want with the profits.

     
  11. Jack

    First of all, I wonder how you are defining “Record Profits” for Cat. There are record highs and record lows. Maybe the share holders will start to get a decent dividend. They are only paying 1.87% dividend now. You never see the real story from the news media when they are talking about profits.
    It is reported “so & so made 10 Billion dollars profit” is that 1% of gross sales or 15%? Or they say profits doubled….does that mean they went from 1% to 2%? Or from 15% to 30%???
    Why does the media always try to mislead the general public?
    As far as what I would do? . . . . I would certainly look around, but my guess is that it will take at least 6 years for the local competition to catch up to Cat. Maybe I would start my own business and keep all those record profits! Oh that’s right…..I already did! But I’m still looking for those record profits….

     
  12. Vincent P

    I share “lulu’s” view/thoughts. I was laid off my aerospace job as a tooling engineer that I loved. I was in a non-union salaried position that witnessed high paid union workers with great benefits not share my “do what it takes to get the job done asap” mentality. I was thankful for my job & loved it but others seemed like they didn’t share my feelings. When I was laid off, I was off work for 14 months for the 1st time in 30 years. I never had a problem finding a job until that day in July 2009 when I found myself in very crowded unemployment offices with a majority of the people being 48-60 year old professional & very experienced blue collar workers that couldn’t find a job either. People with BS & master’s degrees unemployed and/or working at Wal-Mart if they were lucky (in Texas). I lost everything again for the 2nd time in my life and have never recovered because the job market hasn’t recovered yet either. I don’t think now is the time to be striking…if you don’t like your job go try to get another one. You might find it’s not that easy?

     
  13. Walt

    We are entering a period of great change. Oil was cheap and abundant, that is not the case now. We are not able to pay the debts incurred and accumulated under prior curcumstances. Until we develop other sources of energy other than fossil fuels we are unable to provide a future that in anyway compares to our recent past. Corporations as well as individuals must manage their respective exestence as such, to eleviate as much as possible the pain and suffering that is to come. As we move forward into this new frontier of resource scarseity, business will be the first to suffer because it is based only and exists only to make a profit. Profit will no longer be the driving force of our existence. The new driving force will be just to survive. That is to say our basic needs will come before profit. The need to warm our homes not our factories. The need to feed ourselves not our neighbors. The need for shelter and clothing. Sorry to put this so bluntly but these things are already happenning. People as of yet cannot see the forest for the trees.

     
  14. Mike

    I would be happy to have a job still, Unemployment in Illinois is just below 10%. I was laid off from Cat in 2009, and brought back in 2011 for 15% less in pay, but I was happy to be back working. After being off for the two years, I came to realize no matter how bad you feel it is working for Cat, it’s still better than what is on the outside.

     
  15. Larry G

    Hawker – Beech would not be in such dire straights if the Obama adminstration had awarded HB a government contract for military planes rather than a Brazilian company. To date their is no justification.

    Many years ago, I was able to tour the machining area of a Boeing plant and was amazed at the rows of CNC machines gnawing away at inconel, titanium, or aluminum for hours on end. But more to my amazement was all the “so called” machinists standing around in groups “chit-chatting”. I don’t believe I saw anybody with a part or tool in hand, deburring a part, performing an inspection, pressing a control button or pushing a broom.

     
  16. Lane

    I’d check my pay and benefits against other shops in the area, assuming anyone is even hiring. Chances are I’d find I’m doing very well versus similar jobs in non-union shops in the area. I know that the “new” economy and the “new reallity” is really hitting the union workers hard, but frankly they have been making $30/hr doing $15/hr jobs for far too llong, and it is finely catching up to them. CAT and other companies will not be able to survive the enevitable next recession while paying double the salary and ridiculous employment and retirememt benefits – that ship has sailed, no matter what their profits may be today. CAT and other union companies are benefiting from a lot of highway contruction nation-wide, and an oil/gas boom, both of which won’t last for ever. Some of that money has to be saved. If the company goes, so do the jobs.

     
  17. David Harsanyi

    To be fair, everyone should make 40 dollars per hour and we all have the same fair share. Be thankful Obama is in office. He loves big spending ,big labor support, big world trade, big taxes , big promises and more big suprises to come if he is elected again…
    Whew, I just woke up from a nightmare!! No seriously, employment is not mandatory, if your un happy then get a new job. Union free is the only way to be yourself and happy.

     
  18. JACK FROST

    The Electronic and Electrical Unions started driving the electric and electronic industry out of the country starting in1941.They succeeded. Starting in 1950 the unrest in Peoria gave impetus to the German and Japanese heavy equipment industries. By 1950 I could buy closed die forged items cheaper in Switzerland than I could get the same in America. There iis nothing wrong with the unions, but the leadership stinks and is self destructive.

     
  19. Rod Brower

    I feel that the Unions time has past.
    Ever drive buy the Everett WA. Machinist Union Office.
    The front lawn has a bit of art installed on it.
    The sculpture of a Father, Mother and two Children with Waving Picket Signs around a couple of burn barrels.
    There in no longer any working together for the common good of a Community, a Company, a City, or OUR COUNTRY in Bussiness or Politics.
    This is still a good county, but we are very far on our way down a very dismal path.

     
  20. Shackled and Drawn

    Go to work and try to change the situation. This has been the situation for the past six years.

     
  21. Rude Awakening

    I would be thankful I still had a job. My company was bought out and the rules changed at that point. No pension, reduced wages and a new management style that was not in my comfort zone to work with or trust anymore. So I moved on.

    Last time I checked it was still a free country and nobody is forcing an employee to stay with a company. If a union employee doesn’t like it quit, find a new job, move on they days of big labor are over.

    Unions do nothing but drive the cost of labor up and business off shore.

    IF THEY DON’T LIKE THE EMPLOYMENT THEY HAVE, MAYBE THEY SHOULD QUIT AND FIND GREENER PASTURES. OR, STAY AND PROVE THEIR VALUE TO THE COMPANY.

     
  22. J.R. Chagolla

    Being one of the people who lost their job in the 911 frenzy, then have hard times due to work going over seas, I say be extemely happy you have employment. Yes unions were very helpfull when employers were ruthless, but times and economies have changed. Grow a pair and stay, or leave for greener pastures!

     
  23. Tony

    Well let’s see: Over the last 10 years CEO pay has risen over 400% and I am pretty sure not one of yor readers can claim the same. It all goes to how much anyone person thinks they are worth. I cheer these men for trying to get a share of that 400%. Many can sit around a bash groups like unions and Occupy but they are the ones who are standing up and not just rolling over to big business. Big business needs to employ the masses because if they dont the only thing left for the masses is violence. How long will it be before our own government officials who bend to big business sit back and shout “Let em eat cake”

     
  24. Jim

    I think we need a few more facts, doesn’t help when the article is slanted ” with the Joliet workers seeing the company doing so well yet offering no wage increases and reduced health care benefits for the next six years”… What are costs doing? A big part of OBAMACARE is you can’t define cost. Until the government participates in the recession, overall cost will remain high. The best thing for the country is to have costs “right sized”, which means reduced and the “fat” cut out of the system. What are the current benefits and salary’s of the workers? What range are they in-low/middle/high? How does this compare to like workers-union or non-union? If Cat has excess capacity why increase overhead? Lastly, not sure why the union continues to use 20th century tactics! The shop conditions and work is probably as good as it can be, so why is the union getting inbetween the consumer and the company! This has never made sense to me. Look at the shutdown at the state level, taxpayers are still paying the bill!

     
  25. Paul

    A few facts,
    Fact 1: Caterpillar is reacting to the market place; there is a need to lower costs and increase profits. By putting a concessionary proposal on the table they risk losing their skilled CNC machinists. Caterpillar’s customers may or may not care as long as they still get a quality product for a fair price. Why can’t a company keep down cost, build quality products, and stay profitable? (Who do they think they are?)
    Fact 2: The union is reacting to the concessionary proposal, they believe that they had something to do with Caterpillar’s profitability and should share in the wealth. By rejecting the company’s offer they risk their income, their families, their future, some may never find work again. When was the last time we bet the entire business on a single deal? Many spent years training to be skilled machinists. Why can’t someone apply themselves, train, work hard, stay faithful, and get ahead. (Who do they think they are?)
    Fact 3: Both parties may need to be more proactive instead of reactive. (Who do I think I am?)

     
  26. Eric

    CAT offered the Int. Assoc. of Machinists in Joliet, IL essentially the same deal that the UAW in Peoria, Decatur, Aurora, etc. agreed to last year. The IAM was also offered a $5,000 signing bonus per employee. Approximately 15,000 UAW members agreed and are back to work. I highly doubt CAT is going to concede to 700 machinists. The IAM needs to wake up and realize what is at stake. Of course it wouldn’t be the first time that union leadership held out and destroyed the opportunity for its membership to go back to work. CAT will replace the IAM workers indefinitely or move the work somewhere else. Look at CAT’s EMD locomotive facility that used to be in Canada before that union membership rejected CAT’s offer. It is shutdown and the jobs moved to Indiana. Unions need to figure out how to reinvent themselves to be a valued group that a company can’t live without. Union leadership needs to be held accountable…

     
  27. Ed Gnifkowski

    I haven’t seen a copy of the existing contract so am unable to evaluate. The biggest item that Cat should persue is to make sure that they run the company and not give the Union operational perogatives. A fair contract where management and labor both adhere to the articles almost always ensures a successful operation.

     
  28. John F.

    First off, I’d stay
    Second, we are entering an era of union labor unrest. Since union dues are typically based on hourly wages, union management is unwilling to allow votes on or encourage contracts with reduced wages for their membership – it would force union management to reduce their own structure, benefits and pay.

     

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