Caterpillar Workers Give In

I wrote about the strike at the Caterpillar plant in Joliet, Illinois, three months ago. Cat was absorbing a strike of union workers who were being asked to accept a six-year wage freeze and a cut in health care benefits to keep their jobs at the hydraulic components plant one hour southwest of Chicago.

This past week the workers took a slightly modified deal, against the wishes of the officers of the Association of Machinists and Aerospace Workers. Cat raised a proposed $1000 ratification “bonus” to $3100 to tip the vote to their side and is converting a $7.8 million dollar fund that had been used to supplement the wages of laid off workers into a pot sweetener for older workers who are being paid well to retire.

Cat earned $5 billion last quarter, but still threatened the Joliet plant’s striking workers with moving jobs either to other North American plants or abroad. The recent closure of a London, Ontario, factory after the workers rejected a 50% pay cut by Cat, validated the threat of a plant closure if the workers refused the company offer.

The workers’ capitulation at Caterpillar in Joliet, which is only a half hour away from our Oak Forest facility, finally evens the playing field between big companies and their job shop suppliers. It will enable Cat to keep more work in-house because their labor costs will be more competitive with local companies, but it will also even up the hiring landscape for skilled workers, many of whom prefer the atmosphere in smaller well-run suppliers to big company regimentation and union peer pressure.

At the same time the Caterpillar union news came out, the even more astonishing news appeared that “tenure as we know it” for New York City public school teachers had been broken. This had long been a goal of New York Mayor Michael Bloomberg, and he finally gained the upper hand against the entrenched unions in the city that made it so difficult to prune weak teachers when they got their tenure card after three years on the payroll, even if they stunk at their jobs.

In Chicago, Rahm Emanuel, the new mayor, is also pushing back against the Teachers Union with some success. The housing recession in Chicago has kept yuppies with kids locked into their homes, when they normally would have moved to the burbs for better schools. Many of them are getting active in their local schools, giving Emanuel an important ally in pushing for change in the system.

Recently, Motorola Mobility, now a division of Google, announced they were moving a huge number of jobs to downtown Chicago from the Northwest suburbs. This puts more pressure on Emanuel to upgrade the public schools in order to enable companies like Motorola Mobility to hold onto and hire younger workers with children.

It is an interesting development in American politics that ambitious and smart politicians like Bloomberg and Emanuel have chosen local office rather than Washington jobs. They probably have done so because it is actually possible to make meaningful change in a relatively short period of time in a city if you can control the levers of power – not that different from the position of Douglas Oborhelman, CEO of Caterpillar Inc.

Question: Does the Caterpillar labor deal make you happy or mad?

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18 thoughts on “Caterpillar Workers Give In

  1. Josh Weaver

    I have to say on the issue of unions I’m torn. On one side I really do think labor needs someone to fight for them. I don’t like to see the wages and benefits of the working man continually eroded. We’ve gotten to a point where we have generational tiers of workers as well which works against everyone. We have groups of older workers who have seen fit to establish their own aristocracy making deals to keep their own benefits at the expense of the young guys coming into the shop with new families to support. 15 years from now when it comes time for those same people to vote on whether they should continue your retirement when they have none of their own, how do you think they’re going to vote?

    The problem with unions is over the past 40 years they really haven’t done their job. They were forces of good for the first half of the century but the beneficence collapsed under their bureaucracy. If they Unions had been fighting for workers for the past 40 years instead of for their own power and influence the median household income wouldn’t have remained relatively flat since 1970(practically cut in half if you account for the fact that most household incomes now come from two wage earners instead of just one).

    So that’s where I stand, I don’t like to see the wages reduced and the benefits slashed for skilled workers. It’s painful that we’re competing with Chinese labor by reducing ourselves to their level which will only impoverish our labor force. We should be competing based on quality and innovation. I don’t want the US to become the new Mexico or China. I also have a hard time with Unions who only seem to care about sustaining their own power and influence with no regard for the rest of us or who sell out the young laborer with no voice to appease the squeaky wheels of a soon to be retired generation.

  2. Eric

    Like it or not, if a union can’t use the usual tactics of fear and intimidation to get what they want, then it comes down to market forces. What is a job worth? What is a company willing to pay? What is a person willing to accept to spend their day applying themselves? No one is forced to go to work. Or stay in an undesirable job.
    The unions have a place but they need to reinvent themselves. The old ways, policies, and demands don’t work anymore. Union leadership needs to redefine services they offer to help the workers and the companies they supply with labor.

  3. clayton smith

    Howdy LLoyd,

    Don’t worry I’m not going to say a word about Obama, but did you see where he got his picture on the cover of Newsweek?

    Now to the question at hand. I can answer the question about this Union with several words but I picked just this one: KOMATSU

    RGDS / C.Smith

  4. Cartman

    Well it makes me mad. GREED 1st off they made billions in profit. They bought out Bucyrus Erie, a competitor, and redecorated the buildings and made them look all nice and clean, to find out now that they did that at the price of paying their employees less or outsourcing the jobs. At that threat alone of outsourcing, they should be put in a tax bracket of 30% instead of paying no taxes or under 2% The republican way is that the company makes a lot of money and that then gets passed down to employees to make more, but the company’s GREED ruins it.

  5. Val Zanchuk

    The decline in union representation in manufacturing is an indication of the significant reduction in the relevance of unions, as they have been managed, and positive changes in labor relations as practiced by many progressive companies. Unions were a force for the good when they started, but as much of what unions fought for became laws for everyone, their relevance began to fade. They are now trying to maintain a status quo that flies in the face of market forces. The more they fight, the less relevant they become. They need a radical change in focus and purpose, moving away from stifling work rules and confrontation as the basis for engagement with ownership, and toward cooperation to supply the skilled, flexible workers so much in demand in manufacturing. Companies need to move away from labor confrontation and greed, and move toward recognizing labor as a valuable part of the success equation. Market forces, cooperation, open books, fairness, respect are all part of that equation. Many non-union companies are already there.

  6. BOB

    It’s all about economics. Now it’s worldwide. We (US) has to compete. No more free rides by the unions.

  7. mong-lor

    Glad mostly, it wasn’t a complete emasculation like a 50 percent cut in wages, it was a matter of compromise for both sides to the better good of the community at large. A nice tie in to acknowledge the saavy negotiating on the part of Bloomberg and Emanuel to eliminate some of the more perverse benefits our public school teachers have garnered through public worker unions. I have never been a big fam on tenure in any regard. It’s nice to see a common sense approach on both sides regarding public school issues. This would be a much better method for Indiana versus diverting millions of dollars in public school funding towards vouchers for charter schools under the guise ofchoice, when in many smaller communities these choices are not available.

  8. Larry B

    I love it when company management gets to operate the way they are paid (by stockholders) to do. I don’t recall any union in the history of industrialization ever funding enough equity into a company to receive a seat on the board. If and when they do, they can be one vote on the board. The decision makers that got the company to the size it is should continue do what they do best so they can keep the few jobs we still have in the U.S. (And this is coming from a competitor of Cat.)

  9. Dick J

    I am afraid that strong unions that are successful at keeping a wage well above the prevailing market wage will only result in the quicker demise of those industries that are forced to compete in the global marketplace. I should add the caveat that this is true if the labor is being used in a similar manner as that in the low wage country.

    The best approach for manufacturing concerns based in high wage countries is to add value and use innovation in ways that low wage countries are not. The ability to make a high precision part or a part out of a more exotic material can add value in some industries. Use of high performance machine tools that can replace multiple standard machine tools greatly increase productivity while reducing WIP. The use of robots to load machine tools (disclaimer, I work for a robot company) can greatly increase productivity and, if machine vision is used, can also increase quality. I would rather pay an employee a high wage to service multiple robots than pay the same employee to load a MT when competing with a low wage country for the business.

    If you want to see what’s new, take the time to attend IMTS with an open mind and you will surely see ways to enhance your company’s productivity with automation and new MT technology. This is the way to keep your company competitive and allow your employees to enhance their skills and justify higher wages.

  10. Paul

    The playing field is more level now. I started to work at CAT in January. During the strike, I found another job, pays better, better shift, more challenge, greater opportunity for personal growth. When CAT didn’t come through with a competitive offer, I quit. Group talk is lost on an individual basis, CAT this or Union that. In the end I’m looking out for myself. I wish CAT well, but the truth is they cannot compete for skilled labor. I believe that many that now work there will also quit or retire ASAP.

  11. Semi retired one

    You referred to the generous pension of the Caterpillar pension, I live on this generous pension from Caterpillar and believe me If you think it is generous, I pity your ignorance! In the years I worked at Caterpillar I earned every penny I was paid. I saw executive pay go thru the roof. Now you can work at Caterpillar full time, with a wife and two kids qualifies for food stamps. Caterpillar trains welders every month in their East Peoria plant, They have to because their pay for welders is so low when they get get certified they can hire in elsewhere for $ 2,00 more per hour than Cat pays. Caterpillar has a severe BRAIN DRAIN

  12. Josh Weaver

    Semi retired one,

    My apologies I wasn’t specifically singling out CAT or their older generation of workers with what I said, it’s something we’ve experienced here in Michigan as well. I was merely making a point about the willingness of older workers to sacrifice the benefits and wages of the young/new labor to keep their own. I’m talking about guys in their 40’s who want to retire at 45 or 50 who started at 20$ an hour in the 90’s or 80’s and make deals so that the new guys coming in are making 12$. Even if the new guys were getting the same wage coming in as the guys in the 80’s and 90’s they’re still making significantly less due to inflation. The point is that when those people all retire and the new generation gets a chance to vote you’re going to lose it all. This just happened here and a lot of retired GM workers lost their benefits. The same concept applies to all those folks out there over the age of 55 who support plans to slash medicare and social security benefits because it won’t affect them. Guess what, the younger generations will eventually be the largest voting block and they aren’t going to pay for your prescriptions forever at their own expense. And this is exactly the sort of thing that makes unions look bad. You have a generation of union workers who retired in their 40’s or early 50’s who got high wages and solid pensions at the expense of the generation who follows. If that’s the kind of thing the unions are fighting for they’ve severely gone off course.

  13. James Thompson

    it is not a case of happy or sad As it is not just black and white Sometimes there are problems with unions, we should also remember many lives were lost by union members for the 40 hour work week and by the way how long has it been 40 hours

  14. Ed Gnifkowski

    To date Rahm Emanuel has not earned too much respect from me. I pegged him as prefering to be the biggest fish in the smaller pond rather than a pilot fish in the bigs.

  15. Jim Goerges

    Maybe the other side of the problem should be looked at! Cost of government! It is a monopoly. Cost of health care! Unfortunately socialized programs have become mismanaged and the intended scope of who receives benefits has significantly changed.
    Unlike government, private business must make a profit. Can you pay more for grocery’s, heat, health care ect.? I think if costs went down, we would have more money to spend, I think the retired folks would agree!

    How can you pay more in wages when health care costs increase 10 to 25 percent per year! Most government workers and unions get these for free! The taxpayers pay for this. The problem is you don’t know what something is worth unless YOU pay for it. If all employees paid for there own insurances, they would be irrate and would bitch and demand that costs were less. People would become very involved in the process, this oversite or lack thereof is one of the big reasons prices run amuck. People need to be intimately involved in the process and that would certainly be a huge step in cost containment.

    Now it just gets paid, really not much oversite. Government has run rampant and unchallenged because they have no competition. Now we have over 50% of our population who likes this yet complain costs are too high! Overhead is TOO HIGH, government needs to participate in the recession otherwise there is no chance of any correction in the market. Government is over 60% on GNP spending. Now, 40% of the economy has participated in the recession and we still have serious issues. Until government is forced into recession, there really is nothing that can be done. Look at the debt! The good news is something will happen. The bad news is it isn’t going to be good, either we fix things, or we will be forced to fix things. The lesser of two evils is we take our own medicine. I do hope everyone is voting in November. Remember, bad people rule when good be do nothing, GET INFORMED, LEARN HOW THINGS WORK, GET INVOLVED and VOTE in NOVEMBER!


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