Evansville Courier & Press, April 18, 2010, Sunday

Evansville Courier & Press

April 18, 2010, Sunday

Evansville Courier & Press

Whirlpool: Conflicting interests in today's marketplace

Once-powerful manufacturing unions keep losing ground to companies trying to maximize profits by outsourcing jobs
By Susan Orr


EVANSVILLE — If you happened to be driving on U.S. 41 on the afternoon of Feb. 26, you couldn't miss the hullabaloo.

Several thousand union members, many from out of state, stood along the road in front of Whirlpool. They waved American flags, chanted "USA! USA!" and gripped signs with pointed messages.

"Whirlpool is Selfish," one sign read. "Your Job could be next," another warned.

Local 808, the Whirlpool workers' union that organized the event, said the rally was meant to persuade the corporation to rethink its closure plans.

The closure, announced in August, affects about 1,200 employees, most of them unionized, hourly workers.

Many factors, no one source

Those with a different point of view might say unions cause U.S. manufacturing job losses because the unions make life hard for companies and force them to pay artificially high wages.

But people familiar with manufacturing, and with Whirlpool in particular, say the situation is not so clear-cut. Many forces contributed to Whirlpool's decision, they say, and the Evansville plant shutdown can't be blamed on any single factor.

Moreover, one organized labor expert says industrial unions are far weaker now than they were in their heyday, and most have not figured out how to effectively operate in a global business climate.

Among the crowd at the February rally were several people holding letters that spelled out an impassioned plea: "please don't leave."

Passing motorists honked frequently, presumably in support of the cause.

Later that afternoon, AFL-CIO President Richard Trumka and IUE-CWA President Jim Clark spoke to a packed room at the Local 808 union hall.

A pep rally for a losing team

The afternoon's events had the air of a pep rally, but if you really stopped to ponder what was happening, it might have broken your heart just a bit.

This pep rally was taking place after the game was over — and the union was the losing team.

In a letter to employees two days before the rally, Paul Coburn, director of operations at the Evansville plant, wrote: "We understand that the union's purpose is to encourage Whirlpool to revisit the decision to close our Division. We have reminded the Local 808 leadership that the decision to close is final and is not under further consideration."

Exactly one month after the rally, 455 Whirlpool workers had their last day on the job as the company eliminated its second production shift. The plant will shut down altogether in June.

Long before the February rally, Local 808 President Darrell Collins said, the union did all it could to persuade Whirlpool to stay. It agreed to pay cuts, he said, and helped the company improve its efficiency.

"We were trying to make this division favorable," Collins said.

"You need to become competitive in order to stay."

Clearly, the union's efforts weren't enough.

Collins places all the blame on Whirlpool.

"There's no reason to leave here but greed," he said.

'There was a tipping point'

Whirlpool declined to talk to the Courier & Press for this story, nor would the company allow reporters or photographers inside its Evansville plant.

"We do not comment on our relationships with suppliers, partners, unions, etc.," Jill Saletta, Whirlpool's director of external communications, wrote in an e-mail. But other parties were willing to talk.

Union activity likely didn't influence Whirlpool's decision to offshore its Evansville production jobs, said David Macgregor, a financial analyst who follows Whirlpool and the consumer durables market.

Macgregor, the founder, president and director of research at Longbow Research in Independence, Ohio, said Whirlpool is facing a variety of economic pressures, as are all appliance makers.

These pressures include the large wage gap between the United States and some foreign countries, the push toward lean and consolidated manufacturing operations and the recent drop in home sales and home-related expenditures.

On top of all that, Macgregor said, the top-mount refrigerators made in Evansville have fallen out of consumer favor, and that model is now considered at the low-cost end of the refrigerator spectrum.

All those factors point toward closing the Evansville plant, Macgregor said.

"There was a tipping point, as there is in any business model," he said.

Negotiations, then concessions

Local 808 represents only Whirlpool employees.

The union's main role, Collins said, is to represent its members and make sure they get a fair deal in negotiations with the company.

But, he said, the union also worked with Whirlpool to help it remain competitive.

"Us representing the people has never changed ... just some of the factors have changed over the years," Collins said.

For instance, Local 808 members participated in "lean productivity" exercises to help make the plant more efficient, Collins said, even with the knowledge that greater efficiency would likely mean a smaller work force.

And in the most recent round of contract negotiations in February 2009, Local 808 agreed that new Whirlpool workers would start at a much lower wage than other employees. Under the new contract, workers hired after February 2009 would earn a base wage of $13.50. That compares with a pay scale of $17.09 to $21.45 for existing workers.

Local 808 is a perfect example of the challenges facing industrial unions, according to one labor expert.

Unions have lost much of their strength in recent years, and most haven't yet figured out a way to reinvent themselves, said Ruth Needleman, professor of labor studies at Indiana University Northwest.

"They don't have a strategy for dealing in a global market," said Needleman, who identifies herself as pro-union.

Needleman said that from the 1950s through the 1970s, the relationship between unions and management was fairly stable: Union leaders negotiated with employers on employment contracts that spelled out pay rates, cost of living increases, vacations, holidays and other benefits.

"There were battles, there were strikes, but it was a little bit more like a ritual than warfare," she said.

This relationship worked, Needleman said, because at that time the United States dominated in manufacturing — many other developed countries still were recovering from World War II.

'The things that are killing us'

By the 1980s, those nations had not only rebuilt, Needleman said, they were ahead of the United States technologically.

U.S. manufacturers responded by reducing their work force and transferring jobs overseas.

In turn, unions shifted into defensive mode, Needleman said, accepting wage cuts and other concessions in an effort to save their members' jobs.

It didn't work. The lure of cheap labor abroad proved irresistible to many companies.

"The unions were working on this idea of 'save jobs,' but were completely unclear on the paradigm shift overall," Needleman said.

"The things that are killing us don't come under the contract."

Another labor expert agreed.

Local 808's role in helping Whirlpool improve productivity is a common union strategy for saving jobs, said Sally Klingel, director of labor/management relations at Cornell University's School of Industrial and Labor Relations.

In some cases, such as the auto industry, this tactic has been successful. In others, it has not.

The problem, Klingel said, is that the gap between American wages and overseas wages has become larger and larger.

"It's almost impossible to make up those wage differentials just through quality and efficiency," Klingel said.

According to the Bureau of Labor Statistics, the average hourly direct pay for manufacturing production workers was $5.18 in the United States and $1.09 in Mexico in 1975. (Hourly direct pay includes both hourly wages plus other pay such as bonuses, premiums and overtime pay.)

By 2007, the gap had widened considerably: Average hourly direct pay was $19.17 in the United States and $2.15 in Mexico. Wages in the Philippines and Sri Lanka were even lower. (China was not included in this data set.)

Unions: Smaller, still in the game

Union bargaining power isn't the only thing that has declined in recent years — so has the number of unionized workers.

According to the U.S. Department of Labor's Bureau of Labor Statistics, in 2000, 14.9 percent of manufacturing employees — 2.8 million people — were members of a union. By 2009, that had dropped to 10.9 percent, or 1.5 million people.

And according to annual reports filed with the Labor Department, Local 808's membership also has dropped — from 2,000 members in 2001 to 877 members last year.

But despite their weakened position, unions still play an important role, Klingel said.

For one thing, she said, unions give workers an avenue for resolving wage and hour disputes that might otherwise be decided in the courts system.

And when a union negotiates a certain wage for its members, those wages help set the bar for wage rates in the larger economy.

"There's strong economic data that suggests that unionization raises wages overall," Klingel said.

'Unions don't make or break companies'

Data shows that unionized manufacturing workers do earn more than their nonunion counterparts.

According to Bureau of Labor Statistics data, full-time manufacturing workers who were union members in 2009 made an average of $800 per week, compared with $762 for nonunion workers. (Including all private-sector industries as a whole, union members made an average $856 per week as compared with $697 a week for nonunion workers.)

That said, Klingel does not agree with the notion that union activity always makes a work force more susceptible to outsourcing.

Though the presence of unions might influence a company's decision to offshore in some industries, Klingel said, the availability of low overseas wages is usually the driving factor.

And to look at the situation another way, Klingel said, it's not only union jobs that are being lost.

"You've certainly seen a lot of nonunion industries move overseas," she said.

As an example she cited toy manufacturing, which is not heavily unionized but has moved almost entirely outside of the United States.

Ira Boots, Berry Plastics' chairman and chief executive, said union activity doesn't influence his decisions about where to locate production facilities.

Evansville-based Berry has 81 plants, including 72 in the United States. Some of the plants are unionized, others are not.

"Unions don't make or break companies. Companies don't make or break unions," Boots said.

"Our union plants are successful; our nonunion plants are successful."

Likewise, Mayor Jonathan Weinzapfel said he doesn't believe Local 808 in any way hastened Whirlpool's departure.

In his talks with both union leaders and Whirlpool management, Weinzapfel said the relationship between both parties seemed smooth.

"(The union) understood what was at stake and were willing to make sacrifices," he said.

Taking a global viewpoint

In order for unions to survive in today's economy, Needleman said, they must reorganize themselves and take a broader view.

"Bargaining contracts plant by plant is a prescription for weakness and loss. You just can't fight these global companies that way."

Some unions have started to operate in new ways.

Jim Clark, national president of the IUE-CWA union with which Local 808 is affiliated, said his group has been able to save American jobs even in the age of outsourcing.

In one case, Clark said, an auto industry manufacturer that employed IUE-CWA members wanted to move production to Mexico. Once the union looked at the numbers, Clark said, it had to agree with the company — continuing to make that product domestically did not make sense.

So IUE-CWA helped the company set up operations in Mexico, Clark said, and the union also worked with the manufacturer to bring another product to the U.S. plant, saving those jobs.

In another example, Needleman spoke of steelworkers in the Gary, Ind., area who have participated in trips to and from Mexico to meet with workers there. The two groups are working together with the idea that if American unions don't help raise the standard of living in Mexico, eventually U.S. wages will sink to Mexican levels, Needleman said.

"Workers are being shafted everywhere, some worse than others. And the only way to make a change is to stand together," Needleman said.