Butler Mfg. and union disgree over reopening contract
by Mike Kroll and Norm Winick
The same week that Gates Rubber Company ceased manufacturing hoses and layed off another 50 workers at its Galesburg plant, Butler Manufacturing union employees were told that management wants their contract reopened and employees to take wage concessions totalling $8 an hour.
On Thursday, October 30th, Butler officials released disappointing third-quarter financial results; a net loss of $13 million this year ($2.05 per share) with year-to-date sales $71 million less than last year's less than spectacular third-quarter figure. In the company press release it said, "The [quarter's] pretax loss was approximately $2.8 million compared with a pretax loss of $0.9 million for the same period last year. Selling prices remain at very low levels and while the aggressive cost and capacity reductions we implemented have helped, they have not been sufficient in the short term to make up for the lower volume and depressed pricing levels."
After these financial results were released, local Butler union employees received Monday what amounts to an ultimatum. Union officials have been given until this Friday to accept a company proposal that reopens the current contract which isnt due to expire until November 2005 and extracts what amounts to $8 per hour in benefit concessions. The company wants to avoid paying raises scheduled to take effect November 10th and put the modified contract in effect by that date. The readily inferred but unstated threat is that without the concessions demanded by the company the Galesburg plant may be closed. Even if the union agrees to the concessions it is clear that Galesburg employment numbers will be drastically reduced as much manufacturing would be eliminated in Galesburg as the plant is reduced to a "regional facility."
If union officials reopen the contract and accept the company proposal, wages and pension benefits will be frozen until contract end. Additionally, the Social Security supplement for retired workers will be cut in half, early retirement options will be eliminated, the prescription drug plan will be slashed, employee share of health care will increase $20 per week, two holidays will be eliminated and annual out-of-pocket health care expenses will double from $2,000 to $4,000.
According to a Butler Manufacturing press release, "The severe cyclical decline in the nonresidential construction industry during the past three years has outstripped the savings realized from cost reductions and capacity closures that we have implemented over this period. As a result, although the company is current with all payments under its debt agreements, at September 30, 2003, it was not in compliance with certain of its financial covenants. Because we are not in compliance, the lenders have the right to require payment of $90 million of debt recorded on the company's balance sheet, as well as require funding of approximately $25 million of stand-by letters of credit. We are required under accounting standards to reclassify the related long-term portion of this debt, $81.5 million, as a current liability on the balance sheet until we conclude a revised longer term agreement with our lenders."
"As reported in the second quarter, we have been in discussions with our lenders to develop a comprehensive longer term restructuring of the debt agreements to provide enhanced financial and operating flexibility. These discussions are continuing, but have taken longer than expected. Pending resolution of these discussions, the company does not believe it will receive additional funds from its credit line. ...Among the options that are under consideration are the solicitation of private investment capital, asset sales, and the sale of the company." Friday's Kansas City Star reported that Butler, which is headquartered there, "has begun exploring the possibility of selling the company." Butler CEO John Holland told the paper that "the company was early in the process of examining its options ...the process could take three to six months." Local Butler employees are more than a bit concerned about their future as the company continues to struggle financially. Both the company and union officials agreed not to negotiate in the media by discussing the company proposal publicly but some long-time union employees feel that the company proposal is tantamount to an effort to break their union.
They have also been circulating a sheet of paper listing the salaries paid to top Butler officials. Many union members are outraged that CEO Holland makes nearly over $400,000 a year while he wants employees to take such drastic cuts in benefits and pension.
If company executives are successful in attracting a buyer they promise to "recommend" that the prospective buyer negotiate an acceptable agreement with the union. Even if all the concessions are accepted by the union, employment at the Galesburg plant is expected to reduce by at least half in manufacturing and many, if not most, of the administrative and engineering jobs may be unnecessary at a limited manufacturing regional facility. Any way this plays out, Butler's financial problems are likely to spell more bad economic news for the Galesburg area.
The Butler predicament: more Galesburg jobs in peril
by Mike Kroll
The closed-door negotiations being held between Butler Manufacturing Company's Galesburg plant manager Dana Wilson and representatives of Local 2629 of the United Steelworkers of America (representing blue collar employees) have reached an impasse. As a result, the Galesburg workforce will apparently be reduced. The company had asked for the contract to be reopened and the employees to accept wage and benefit concessions amounting to about $8 an hour or face the potential closure of the Galesburg plant. The company wanted agreement by Sunday and there wasnt.
On Monday, a memo was posted to all Butler hourly employees by Wilson acknowledging the breakdown in negotiations and promising to move production "to lower cost alternative producers" and layoff "approximately 70 hourly plant employees on or before November 21" unless the company proposal is accepted by employees.
"This is not the alternative that the Company would have preferred. We have repeatedly made proposals to keep continued employment at the Galesburg plant and maintain a respectable level of benefits in a time of significant hardship for our Company. We believe our final proposal reduces cost enough to operate competitively and keep jobs in Galesburg and we believe you should have had the opportunity to make that decision."
When Wilson first approached the union leadership with the idea of reopening a contract that runs until November 2005 there was an understanding that that neither side would speak with the press. But Wilson apparently saw no reason not to simultaneously bypass the local union negotiating committee by presenting his company proposals directly to plant workers during discussions. This infuriated the union officials who say it may very well be a violation of federal labor law. When union officials asked Wilson to stop this end-around, he reported ignored their request and attempted to convince workers that their union was neither negotiating in good faith nor fully representing the company offers to their membership.
On Sunday, Mark Trone, staff representative of the United Steelworkers of America, sent the following letter to Wilson: "You are hereby notified effective 12:00 noon central time November 9, 2003 any and all offers made by the Union ...have been removed for consideration. The Union in good faith entered into discussions with [Butler] in hopes of obtaining successful resolutions to the company's concerns. In doing so, the Union made several attempts to satisfy the needs of the company in obtaining cost reductions to send a positive message to the lenders. Unfortunately these significant attempts appear to have failed. The record will speak for itself, the Union made considerable movement throughout these discussions. We hope those leaders at the Corporate Headquarters are aware of your decision not to accept our offers. In saying that we will review these offers with them at their request at our convenience."
In his Monday memo Wilson said, "Such withdrawal clearly implies a refusal to present the Company's final proposal to the membership. The Company understands how difficult it is to accept modification in the benefit areas that must occur in order to address the competitive and financial situation of the Company. However, these changes provide what we believe is the best opportunity we have to help make the Galesburg plant competitive at this time and be able to provide employment at the Galesburg Plant at its current, and possibly, an increased level in the future."
This final proposal eliminates all wage increases scheduled to occur under the existing contract, including one that was to go into effect Monday, and commits the union to reopening wages on September 30, 2005 while extending the amended contract for a year. Additionally, all hourly employees would lose one week of paid vacation, two paid holidays, all holiday pay if on disability, and significantly increase employee health insurance costs through the end of the extended contract. A very controversial component of the company proposal is a tiering of the pension plan that mostly protects Butler employees nearing retirement age but reduces pension benefits for employees of ten years or more seniority and significantly reduces benefits for younger employees.
At least one employee characterized this three-tier plan as an attempt to split the union membership along seniority based on self-interest. The youngest employees will appreciate that wages haven't been reduced further while perhaps not fully appreciating the value of pension benefits at this point in their lives. Conversely, the oldest employees who are eligible to retire by March 2005 and would be most sensitive to lose of retirement benefits are insulated from the real cuts.
In Wilson's plan there is a pseudo-commitment to keep the Galesburg plant open as a regional facility if labor costs are reduced by $7.43 per hour from current levels and Galesburg labor costs continue to meet specified company targets relative to other Butler plants. The bottom line is that even with massive concessions by the hourly employees the Galesburg plant will most probably be scaled way back supporting fewer employees and could still be closed. Failure to agree to the concessions is portrayed as a direct invitation to the company to close the Galesburg plant.
The union negotiating committee has reportedly told Wilson that they would try their best to reduce costs but have made it clear that they didn't believe the membership would support an $8 per hour reduction in wages and benefits. After all, the current contract was signed just three years ago and has two years remaining. From the union perspective, Wilson is offering little in return for substantial concessions other than heavy-handed threats nor has he shown any flexibility in negotiations.
What is not clear in this whole situation is exactly what role Wilson has in this process. It has been speculated that Butler officials in Kansas City have merely told Wilson that he must reduce costs in Galesburg or else and that the present approach is Wilson's own initiative. Many hourly employees are resentful that Wilson appears to be seeking his entire cost savings on the backs of union workers. Of special concern to workers is the clear impression that even total acceptance of the company proposal gains little in terms of job security, even in the short-term.
Local union officials are said to be holding a special meeting of their membership on Thursday at the Galesburg Labor Temple to further discuss the situation but reportedly no vote is scheduled on Wilson's "final offer." The Monday memo by Wilson seems clearly aimed at prompting rank-and-file members to force an up-or-down vote out of fear of their jobs.