The question is being asked at dinner tables and water coolers throughout Wisconsin: Why would those union workers at Mercury Marine's Fond du Lac plant vote against the company's last contract proposal?
Why, indeed. At first glance, the consensus rejection by members of the International Association of Machinists and Aerospace Workers (IAMAW) Local 1947 on Sunday makes no sense. The company had flat-out threatened to leave Wisconsin for Stillwater, Okla., unless the Fond du Lac workers bent over and took substantial cuts in pay and benefits.
So, why would the Fondy workers cut their own throats? Isn't a job with reduced wages and benefits better than no job at all?
Why, indeed.
I will not try to justify the workers' vote. But I am happy to try to shed some light upon the mindset and the events that led to it.
The first thing to understand is the history that brought the Mercury Fond du Lac contract dispute to this point.
The company signed a contract extension through 2012 for the workers in Fond du Lac only last year.
"Now, they turn around and say, 'We need a complete rewrite, from cover to cover, of the contract THEY negotiated. It's union busting," said Mike King of the IAMAW. "When it's told to you across the table by a union-busting consultant (hired by the company), it really leaves a bad taste in your mouth."
In recent years, Mercury Marine had laid off about 600 people from the Fond du Lac plant and shifted production to China. The laid off employees could not participate in Sunday's contract vote.
The layoffs left the Fond du Lac plant with a senior-laden workforce. Most of the employees who still have jobs there have 25 to 30 years of experience at the plant. For many of them, retirement is on the near horizon.
Put yourself in their shoes. You are very near retirement. You are making a fine living wage. You have negotiated health care and pension benefits. The company is proposing a new contract that will slash your pay and eliminate most of your benefits, including severance pay for outgoing workers. The contract will cut benefits for retirees and will cut wages for new hires.
Even if the contract is rejected by the union, the company will need two to three years to move all of its production out of Fond du Lac to Oklahoma. If you can ride that time out, you'll walk away with the severance pay from the current contract. And then you can retire.
Or, you could take the figurative kick in the teeth - a pay cut and loss of benefits, including severance - and retire with less.
Union officials say the company's latest proposal is a "suicide offer."
Which option would you take?
"Mercury Marine never intended for this offer to be accepted," said IAMAW Midwest territory vice president Philip Gruber. "Despite progress on every major issue and a commitment by the IAM to continue bargaining, the company balked in the final hours and added terms and conditions that assured members would reject the offer … Mercury Marine has been threatening these workers and this community for weeks. Some companies may hint at dire consequences as a bargaining tactic, but rarely do we see such extortion in plain view. It's unethical, it's un-American and I respect any worker who stands up and refuses to be bullied."
"They (company officials) knew these were deal-breakers. It's gut-wrenching. We really, really tried to work with them," King said.
Company officials say they already have begun the process of shifting the headquarters and production from Fond du Lac to Stillwater. Company officials said they will continue to abide by the terms of the contract they negotiated with the union last year.
The company says it is doing what it needs to do to survive in a global marketplace. The company says it must reduce its labor costs.
The company said it expects the full transition to Oklahoma to take between 24 and 36 months.
"We appreciate the patient support of our employees and communities as we’ve gone through this process," said Mark Schwabero, president of Mercury Marine. "This has been a very difficult and stressful process for all involved. We will work closely with our team in Fond du Lac to develop and communicate a transition plan for this 24-36 month process."
The company has said it will stand by its offer to the union until Saturday, Aug. 29. It's possible that an 11th-hour solution could emerge. But you best not hold your breath.
In the end, the company is doing what it believes it needs to do. So is the union. Unfortunately, that doesn't make the pain any less severe in Wisconsin.
Steve Jagler is executive editor of BizTimes Wisconsin.
18 Comments
Wake Up Employees! Mercury Marine signed contracts last year when we didn't have the current administration running things. Consider the following:
1. Despite the idiotic attempts by the administration to slow and stop the recession with a giant stimulus program, the economy is really not turning around the economy and it probably won't for at least five years, despite the "green shoots" propaganda you're hearing. Wage freezes for seven years are VERY realistic.
2. People are not buying luxury items like boats the way they were over the past few years because they're not something people need to survive. No sales= no money to pay people wages from "an era gone by."
3. Cap and Trade will increase the corporate taxes on energy and I have to believe it takes a lot of energy to build the products Mercury Marine makes.
4. Health care- no one knows what the future holds in this area, but no matter what, company costs will increase.
5. Payroll is the single biggest cost in the manufacturing of any product and any attempts to lower it are the focus of all companies right now.
6. The Mercury Marine folks will NOT find jobs that pay anywhere near what they would have settled for.
It is simply too risky under the current anti-business Federal administration for Mercury Marine management to run the company without severe, pre-emptive cost controls, especially labor.
I think the workers were "sold down the river" by the Union. I hope the Business Times will re-interview former workers 2-3 years from now and see how they're doing, because I doubt it will be good. It is a sad day in Wisconsin with the loss.
Hey J. Crawford: With all due respect, did you even read the blog? In two or three years, most of the workers will be retired. That's the whole point. Why should they cut their own throats. It's not like they are in their 20s ... Then you could say that a crappy-paying job is better than no job. But if they're so close to retirement, why would they agree to cut their own throats? There is no way I would, and neither would you. Every point you make is a conservative talking point, straight from the script. At least learn to apply them when they're relevant.
OK Paul, agreed, the soon-to-be-retiring folks would be cutting their throats, so to speak, but not all of the employees are retiring. What about those people? Let's have Biz Times follow up with everyone 2-3 years from now and see how they're doing and perhaps what the economic impact has been on the folks who retired and the ones that had to look for new work. As for my comments being straight from the "conservative script", I think they are from the pro-private sector business, pro private sector jobs script. Unfortunately, this decision will have far reaching impact on that area and much of the rest of Wisconsin.
Excellent analysis, Steve. You've filled in the missing motive gap. They were damned if they did and damned if the didn't. Seems like management has their bags packed already. At least this way retirees will finish their jobs with some dignity. In a very sad way, it's a win-win.
While you guys are arranging chairs on the Titanic, the nation's economy is being trashed by the politicians that we pay dearly to sit on our board of directors. But they are taking cash dollars from our competitors in the process. We want them to do what's right for the nation but the contributors want exactly the opposite. Who do you think they are going to represent? Live with it, or fix it.
Mercury's problem can be traced directly to the giveaway of corporate and banking regulations that crashed our economy. Cash dollars were given because cash dollars work. Only public funding of campaigns will fix our corrupt political system.
Steve, have you actually READ the contract offer??? You wrote:
"Put yourself in their shoes. You are very near retirement. You are making a fine living wage. You have negotiated health care and pension benefits. The company is proposing a new contract that will slash your pay and eliminate most of your benefits, including severance pay for outgoing workers. The contract will cut benefits for retirees and will cut wages for new hires."
There is NO pay cut..or "slash" as you indicated in the offer. In additon Union workers were offered the VERY SAME BENEFITS that are given to salaried workers in terms of health care and pension. Those benefits were not, as you claim, "Eliminated". The EXACT benefits offered to everyone else in the company are offered to the Union folks. These may not be as good as the benefits they had with the union, but by no means were benefits eliminated as you incorrectly state. The company is even offering a 401K with a 50 cents per dollar match for the first 6 per cent! This is hardly a "suicide" offer! These benefits are better than what I get at my job! This misunderstanding about pay cuts is just plain wrong. Laid off workers WOULD be brought back at a lower rate, but no one currently on the job would have lost a single penny in pay. It would have been frozen..not cut and that's a HUGE difference. New hires would also come in at a lower rate but, again, no one, not the person near retirement, not the person new on the job, would have been given a pay cut up front.
READ the offer from the company before commenting.
The (Oklahoma City) Journal Record reported on July 28th that "The (IAMAW) labor contract contains a provision allowing modification under extreme circumstances". If so, the economy, especially in Mercury's industry, is certainly an extreme circumstance.
Why would Mercury Marine not pursue the most compelling economic package (State incentives and labor cost structure) to try to ensure survival? Mercury's Stillwater facility has been manufacturing Mercruiser drives for 35 years. It's workers want to continue to work. More jobs in a city of similar size to Fond du Lac is an exciting proposition to that community. Our loss is their gain.
While I suppose I cannot fault individual union workers for voting for their individual self-interests (if retirement is indeed on the near horizon for most of them), the Union's rhetoric suggests they are boldly willing to lead the members to sacrifice not only current WI jobs to workers in Oklahoma, but all of the future jobs that may have been created here if and when Mercury Marine eventually grows again. It's a sacrifice that a lot of people and businesses in Fond du Lac and Wisconsin will have to live with as the closure ripples through the local economy.
Mercury Marine will do what it has to do to survive (and there's no survival guarantee for any company right now). For the Union it's all about the emotion of the situation. Yes, its rotten for workers to lose what they had gained. It's not a unique story today. Regardless, workers in Oklahoma will happily take up the work. The business decision is a matter of numbers.
Well, welcome to the rapidly de-industrializing Midwest. I suppose that the IAMAW will provide jobs for the folks, right? In a pigs eye they will.
The common union complaint is that all of these problems are from poor management and, I grant you, there is more than a bit of this going around. However, having more than a little experience with both Japanese and German management, I am here to tell you that they are, generally, much worse than the U.S. management. It's just that they don't have the "entitled" work force that we do in union shops. This is particularly true in Japan. In Germany there more of a sense of entitlement among the metal workers but it's interesting how the German worker actually pays attention to his or her job rather than the goofing off or complaining that we see here so often.
It's the unions that are killing industry -- in conjunction the socialist in the White House. One by one the unionized industries are failing and simply fading away. It's like a cancer and we are the terminal patient.
I hope you all like unemployment because I doubt anyone is going to set up a plant in your environment when they can go to a 'Right to Work" state and actually run a company and compete with the world.
That last guy should get HIS facts straight. The company absolutely is demanding concessions in wages, in benefits, in vacation time, in retirement, in severance ... Everything. That was the whole point of reopening the contract in the first place. The company is planning more layoffs, and people who would be laid off would be brought back later at a much lower pay grade. The company is determined to get out of its union contract. That's why they brought in the union busters. They want out of Wisconsin. Period.
For the most part the days of large scale manufacturing in Wisconsin are over. I cut my teeth working for a Wisconsin company for many many years starting on the assembly floor and later in management. I saw the Japanese come in via our licensing agreements and later on as competitors after those agreements ran out. I was a union man and management man both in Wisconsin and outside of Wisconsin and I saw the trend line coming.
Allis Chalmers, Rexnord, Kearny Trecker, Harnischfeger...their all pretty much gone or at least the manufacturing part of the company is. Now a days most remaining companies like Johnson Conrols, Bucyrus. Trane and P&H are fabricators with an Engineering Department....meaning someone else makes most their components and they put them together....but Industrial Manufacturing has seen it's day in Wisconsin. In addition if your only a fabricator..it's much easier to shift your facilties as you don't have a foundry and or machine shop to close down
Add the union part to it and most companies just won't accept that anymore. Stockholders want a return on their investment and if Oklahomma can do it as good and cheaper ....it's the duty of the company to go for it. And don't kid yourselves about Oklahoma....their hard working, very dependable workers who value a job.
Tim,
I did not say the company was not asking for concessions. I DID say current workers would not have their pay cut. I also said, and I have read the actual offer, that Union workers would be placed on the same retirement/benefits plan as salaried workers. You are simply speculating that the company is trying to bust the union. There are no facts on paper to back your contention up. You also speculate that the company wants out of Wisconsin. If that was truly the case it could leave at any time it wants and point to economic conditions as justification. Such a move would be totally legal under the law. Too many folks are confusing speculation and rumor with the absolute facts that appear on the proposal from the company to the union. No pay cut for workers already on the job, no elimination of retirement, no elimination of insurance coverage. Benefits will change, but they are not eliminated. And the change puts everyone in the company on the same page, it's not like the union has been singled out for "breaking". Yes, there are major concessions in pay for new hires and pay for laid off workers who are brought back. There are sacrifices, there is no doubting that. My point was this is far from a suicide contract. Please take time to READ the offer before reaching an incorrect conclusion. It's far from painless, but it is also far from "suicide".
I tend to agree with J. Crawford. It is myopic and selfish on the soon to be retirees to sink the Wisconsin Mercury Marine operations. Where is Doyle to hammer away for the long term? As long as you have workers in other states that are willing to take on the work without unionizing, unions are doomed.
Peter Skanavis
Hey Hererra. Let it go. They brought in the union busters. They are demanding to slash and burn it all. There was nothing the union could do. End of story.
I understand both sides. Sad thing is the end result is another loss of manufacturing jobs in Wisconsin. If 600 of those 800 will retire, those 600 jobs would be filled by someone else, someone who may now be unemployed. I bet you those wages and benefits are a little better than the pay at WalMart!!!! If everyone in this state works a service job, then you will see what a tax shortfall really is!! I have 4 people in our office whose spouses all took pay cuts this year despite having negotiated their salaries. During the worst and longest recession in decades, we ALL have to give a little. This dispute is EXACTLY why more and more crap is made in China.
I'm suprised Wisconsin's combined reporting legislation wasn't mentioned.
This is a sad reflection of IAM and union member pride harming everyone. You know the paid IAM staffers will keep receiving their paychecks. Readers should also think about how state taxes play a role in these type of business decisions. It is good that Doyle isn't running again and it is time to elect a Republican who is pro-growth.
While many of the posters are busy trashing the union -- no surprise here -- a question arises. With all the pay cuts and other take-aways, it is any wonder why no one is going to be able to buy outboard motors on $12 an hour pay. Henry Ford, no socialist, got that idea. It seems the "me first" mentality has outstripped rational thought in this country.
We have got to stop this celebration over the gutting of the union and start thinking about how to raise the standard of living.
So called free trade and out right union busting has shrunk the middle class, and taking consumer confidence with it. Let's stop chopping off our collective noses to spite our faces.
Kieth - it's that same Keynesian economic theory that's brought us "building the economy from the bottom up" - how's that working out for us? UE is at 10% plus and climbing. Instead of fretting about the "shrinking middle class" how about thinking about the incredible shrinking economy as a whole?