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Caterpillar: The other shoe drops in York

By , - Last modified: February 15, 2011 at 9:23 AM


To many in the community, the intensity of Caterpillar Inc.'s March 19 announcement to close its York manufacturing plant paralleled the force of the thunder storm that battered much of York County. But union and management representatives reacted to the closing as though it was only a spring shower.
"Our intention is still to work out an agreement with Caterpillar," said Karl Mantyla, spokesman for the United Auto Workers international union in Detroit. "It's not the first time they've announced a closing and booked the cost."
Caterpillar's spokeswoman is also matter-of-fact but less sanguine about an 11th-hour agreement.
"We've exhausted all our avenues for keeping the facility open," said Martha Hausser at Caterpillar's Peoria, Ill. headquarters. Asked about the UAW's reference to a future agreement, she replied: "I think I'll just repeat that we've exhausted all our avenues."
National trends like corporate downsizing and the need to meet global competition have been cited as reasons for the closing since the beginning of the drawn-out labor-management battle. But Chris Meisenhelter, professor of management at York College's department of business administration, sees the nonchalance of the UAW and CAT - both organizations based in the Midwest - as indicative of the problem of out-of-town management calling the shots locally. National trends alone did not bring on this impasse, he says.
"York is the festering sore of a wider infection," Meisenhelter said. "It's a good place for CAT to make a point to their union because it's a marginal plant. They can make York an example."
York's plant is marginal because it is a labor-intensive parts plant configured as a machine shop, rather than as an assembly line. This means the plant is not high-profit and replacing it does not involve setting up a whole new assembly line. The UAW's 17-day strike of the General Motors parts plant in Dayton, Ohio, was successful because it shut down a vital assembly line. Also, York's plant is already competing with outsource competitors who can supply alternative products. GM's UAW workers have successfully prevented that from happening.
In addition, Meisenhelter believes that Caterpillar and the UAW's international union in Detroit lacked any incentive to bend over backward for the sake of the York plant.
"The people in Peoria on both sides (labor and management) could care less about the people in York," he said. "They're negotiating from the standpoint of all of Caterpillar. They may lose 15 jobs in York but get them back in Tennessee. The UAW and Caterpillar still have 15 workers, just in another location."
As many as 40 percent of Caterpillar's York workers were willing to cross picket lines, a fact that Meisenhelter interpreted as a strong indication of the intensity of the split between local and national interests. He based his percentage calculations on work done by his graduate students. He added that his son was a $9-per-hour strike-breaker at Caterpillar Inc. of York this past summer.
Both sides were willing to forego a chance to salvage the York plant, which may be another indication of the depth of the hard feelings - and red ink - on both sides of the labor dispute. Caterpillar's UAW workers walked away from annual wages and benefits totaling about $45 million, averaging $15.98 per hour. Caterpillar Inc. is walking away from a 2-million-square-foot plant filled with computerized equipment, and the company will have to make a considerable investment in closing the plant. CAT set aside $269 million for plant closing costs in 1996, according to its annual proxy statement.
"We could play the numbers, but it's a fallacy" because neither set of figures includes important pension information, Meisenhelter said. "It's really (an issue of) hatred. I see that's not going to end. There's no going back. It's such a poisoned environment. It's probably the wisest thing to close the plant."
Meisenhelter said he blames both sides for poisoning the waters. He said the UAW still has not fully shifted its expectations since the decades when Caterpillar, because of a lack of competition, paid high wages and successfully passed on all costs to the consumer.
But he added that Caterpillar management shares equal blame for its heavy-handedness in trying to enact change evidenced by worker hostility in CAT's plants corporationwide.
"The NLRB has issued 190 complaints against the company and many of them involved York," Mantyla added.
Gilbert Gall, associate professor of labor studies and industrial relations at Pennsylvania State University, State College, described the labor-management culture at Caterpillar as "exploitative" and "hostile," saying the perception that the company treated its people poorly had poisoned hopes of an agreement between CAT and the UAW.
But Meisenhelter blames the UAW for playing into CAT's hands by not adopting a more "collaborative" approach to bringing the plant out of the "marginal" category.
Mantyla of UAW said that York's UAW employees took a highly collaborative approach from 1987-1991 when Caterpillar modernized the plant but still expected output to remain steady. He added that Caterpillar even recognized the union for its achievement during that time.
But Meisenhelter faults UAW workers for not continuing in that spirit to make Caterpillar competitive with Kubota Corp., a Japanese manufacturer of earth-moving equipment. He believes that the UAW may have been looking for a payback on its collaborative efforts too quickly.
"Collaboration is not quid pro quo," he said.
Meisenhelter said that Kubota was killing Caterpillar with better prices, higher quality and quicker delivery, until the Japanese yen rose so high against the dollar that it lost its competitive edge. But Mantyla countered that if Caterpillar was so interested in the competitive spirit then their top executives should not be taking huge bonuses and raises.
Terry Orndorff, 53, 27-year Caterpillar employee and chairman of Local 786, said that the problem from his perspective is that CAT is pursuing two options that could never be acceptable to his union: closing the CAT plant or keeping it open with a union agreement that would abdicate all decision-making power to management.
"The bottom line is that it's a marginal plant that isn't competitive with lower cost suppliers" Hausser of Caterpillar said.
Orndorff said that Caterpillar planned for York's plant to have "marginal" profits then used it as leverage to oust the union. "We were supposed to lose money (in the early '90s) to pay off the modern equipment" installed in the late '80s, he said.
"Statistics don't lie, but liars use statistics," commented Penn State's Gall.
Hausser said that Caterpillar invested $1.8 billion for modern equipment companywide during that time.
Orndorff becomes most animated when he talks about CAT's implementation of a two-tier wage system, a crucial component of the signed contract that Caterpillar seeks. He sees it as a measure designed to divide and conquer the union.
"If I'm making $18 per hour standing beside you making $7.50 per hour then it's not going to work." He added, "In five years, it's only going to get worse."
"Unions have, from time to time, made some concessions with two-tier wage systems with companies in emergency states, but Caterpillar isn't in an emergency state by any stretch of the imagination," Gall observed.
Orndorff believes that even if it does not affect his wages, or those of his senior colleagues, that it could come back to bite them when lower-tiered workers get majority power in the union. He believes that lower-tier employees might negotiate away retirement benefits of older workers if they felt that they had been sold out by those retirees.
"Those are the people who support you in retirement," Orndorff said.
Meisenhelter still sees ill feelings as the central issue in the labor dispute.
He blamed the acute mutual hatred on inflamed rhetoric (including paid advertising) conveyed by the media.

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