Abstract
Concession bargaining reappeared with great intensity and frequency at the start of the twenty-first century. We witnessed a new ultra-concession bargaining that was not based on the usual assumptions of the 1980s first-wave concession bargaining. Ultra-concession bargaining began at the airlines, was widely adapted, again, by the Detroit Three (the Detroit automakers, i.e., General Motors, Ford, and Chrysler) and the auto parts makers, and then spread through manufacturing. It took hold in the public sector as employers tried not only to cut labor costs to reduce budget gaps but also to weaken and displace unions as well. Six brief bargaining profiles and a review of the union upheaval in Wisconsin suggest the diversity and intensity of the new collective bargaining.
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Notes
- 1.
Chaison (2007, 2) also wrote “For intensity and complexity, there is nothing quite like airline labor relations.” The airlines became known for its hard bargaining because, as mentioned in the preceding chapter, competition between companies was intense, the industry was heavily unionized, and negotiations were fragmented. Some employers dealt with as many as five different unions, each representing a different craft (e.g., pilots, flight attendants, ramp workers, ticket agents, and mechanics), though some operated nonunion (e.g., JetBlue), and employers frequently negotiate with unions while declaring bankruptcy. In addition, labor relations was volatile because of unpredictable external shocks, such as swings in the price of jet fuel and fluctuating consumer preferences.
- 2.
It has been estimated that it takes a 1 % increase in revenues to cover a 4–5 % increase in fuel costs. The cost of aviation fuel has gone up tremendously over the past decade and this lead to greatly increased fares to offset rising operating costs. For instance, in 2001 airlines spent $14.8 billion on fuel and their fuel bill was $38.4 in 2006 (Michels 2008). From 2002 to 2005, wages and benefits of airline workers were cut by an estimated $11 billion, primary through concession bargaining, despite rising company profits (Finamore 2007). Labor shares of total operating expenses fell from 37 % in 2002 to 25 % in 2006 largely because of negotiated wage and benefit cuts and the rising price of fuel (Hirsch 2007).
- 3.
- 4.
From 1978 (the year of industry deregulation) through 2005, 167 airlines filed for bankruptcy: 152 were for Chapter 11 bankruptcies (i.e., reorganizations as opposed to court supervised liquidations through Chapter 7). From 2001 to 2005, there were 21 airline bankruptcies. Three bankruptcies (United, Northwest, and Delta) were among the largest corporate bankruptcies ever, with combined assets of nearly 60 billion dollars (Chaison 2007). In November 2011, the parent company of American Airlines filed for bankruptcy. The airlines said that a key reason for declaring bankruptcy was the urgent need to reduce labor costs and reach competitive levels. Two weeks prior to the bankruptcy the pilots had rejected proposals for 7 and 9 % wage increases in return for longer working hours and few contributions to their pension plans (De La Merced 2011; Nicas and Spector 2011; Lahart 2012). There were rumors in early 2012 that there were several potential buyers for American Airlines including Delta Airlines and a private equity firm with a history of airline investments. A buyout might be contingent upon lower labor costs through concession bargaining (Chon et al. 2012). In early February 2012, American Airlines announced its intent to cut labor costs by 20 % and eliminate 15,000 jobs or more. The company wanted to slash spending by $2 billion per year and raise revenues annually by $1 billion as part of its plan in bankruptcy court to return to profitability. Wages and pensions would be cut through concession bargaining with the company’s three unions (Carey and Nicas 2012; Koenig 2012).
- 5.
Bankruptcy for reorganization rather than for liquidation (Chapter 7).
- 6.
For a description of the UAW’s unsuccessful attempts to unionize workers at foreign-owned US auto plants, see Dolan (2011b).
- 7.
In exchange for the VEBA and other concessions, GM promised new products for 16 US assembly plants and said it would hire 3,000 temporary workers at full wages and benefits.
- 8.
For the arguments that the auto profits of 2011 do not signal a sustained recovery see, for example, Jakab (2012). He believes that sales were being pushed up by pent-up consumer demand because so few cars were bought in 2008–2010, that recent warm weather may have increased sales, and that the full reentry of Japanese producers into the market would eventually depress domestic sales.
- 9.
Delphi workers received $140,000 for those with 10–26 years of seniority or $70,000 for those with 1–10 years (Maynard and Bunkley 2006).
- 10.
The employers could not afford the lost profit and market share, and the union feared that they would have little public sympathy if the workers voluntarily walked off their jobs in the midst of the recession (No S. Calif. grocery strike 2011).
- 11.
Tyson Workers reject… (2004). One reporter placed the Tyson negotiations and strike in context: …“Tyson has joined hundreds of companies nationwide demanding concessions from organized labor. As corporations grapple with a weak economy, fierce overseas competition, and soaring health care costs, they have made concessions a focus of labor negotiations…” Greenhouse (2003b, 12).
- 12.
In addition to the recommendation that some costly work rules be eliminated, the report lists at the conclusion of its Framework for Cost Reduction, “A 20 % reduction in the wage/benefit package” (Vitullo-Martin and Cohen 2011, 52).
- 13.
For example, the city of Detroit was threatened with the possibility of being administered by an emergency manager who would cut operating costs if the Mayor and city council could not get the public employee unions to agree to concessions in bargaining (Dolan 2012).
- 14.
In 2011, it was estimated that nationwide, state, and local pension funds faced a shortfall of $3 trillion. In many states, more money was being paid to retirees than collected from state employees’ pay and workers’ taxes combined. As funds shrank, public employers faced the difficult choice of either cutting back on services or paying less in pensions than had been promised to retirees (and face possible law suits) (Walsh 2011b).
- 15.
In 2011 46 states had budget shortfalls totaling about 20 % of what they had planned to spend (Bluestone 2011).
- 16.
For reviews of municipal concession bargaining over the past decade, see Pew Charitable Trusts (2009).
- 17.
In 2012, towns and cities with budget deficits seriously considered declaring bankruptcy and following the path of automakers, auto parts makers, and airlines by pressing unions for wage cuts and freezes under the threat of abrogating collective agreements in bankruptcy court. In February 2012, the city of Stockton, California had a budget deficit of $20–40 million and was on the verge of declaring bankruptcy because there was little chance of closing the budget gap with citizens of mostly modest incomes and a 19 % unemployment rate in the surrounding area. With its population of 291,000, Stockton was large enough to draw national attention to the public sector bankruptcy concession bargaining option.
- 18.
- 19.
AMFA won the bargaining rights for workers represented by the International Association of Machinists at Northwest in 1999. For a review of AMFA’s brief history (founded in 1962) and its outspoken leadership, see Rybak and Kennedy (2001).
- 20.
The negotiations and strike at the Detroit Symphony are described in: Detroit symphony musicians targeted (2010), Hogle (2010), Karoub (2010), Oestreich (2010), Smith (2010), Stryker (2010), Wakin (2011), Boehm (2011), Detroit orchestra back for encore after labor, budget discord (2011), and Johnson (2011).
- 21.
- 22.
Despite the settlement, there would still be mass layoffs among the regular workforce. By the end of 2011, Harley-Davidson announced that it was planning to lay off 250 workers or 25 % of the workers at its Milwaukee-area engine and parts plants. If there weren’t sufficient “voluntary layoffs” by April 2012, the company would implement an involuntary layoff program. By that time, the company also planned to hire 150–250 seasonal workers (Harley-Davidson seeks voluntary layoffs 2011).
- 23.
- 24.
A year earlier, Cessna announced 1,300 new layoffs. The workforce had been cut in half during the recession (1300 new layoffs at Cessna Aircraft 2009).
- 25.
In October 2010, the Machinists union at Hawker Beechcraft ratified a 7-year agreement with a 10 % wage cut and guarantees that the company would not relocate its operations (Hawker Beechcraft machinists vote on new contract 2010).
- 26.
- 27.
In the first quarter of 2011, Dr. Pepper Snapple Group Inc. reported an increases in earnings per share and net sales (Dr. Pepper Snapple Group Inc. reports 7 percent net sales gain in first quarter 2011).
- 28.
For descriptions of the union–public employer confrontation in Wisconsin, see Bauer (2011), Cooper and Greenhouse (2011), Davey (2011a, b), Greenhouse (2011a, b, d), Kelleher (2011), Lewis (2011), Malone (2011), Niquette (2011), Pitsch (2011), Provance (2011), Smith and Haberman (2011), Wheaton (2011), and Zernike and Saulny (2011).
- 29.
Public safety workers (police and firefighters) were exempted from the proposed law, and would pay only half the rate of the other public workers toward health care benefits and little or nothing toward their pensions. Public safety workers were excluded because the governor believed that they would lose support if it covered workers who enjoyed strong public support (Niquette 2011). Under the proposed bill, state employees, other than public safety workers, would have to contribute 5.8 % of their salaries toward their pensions (up from very little or nothing in many cases), and at least 12.6 % of their health care benefits (up from an average of 6 %) (Maher and Merrick 2011).
- 30.
In Ohio, legislation similar to that of Wisconsin was also passed by the state legislature and signed by the governor but it was rescinded by a voter referendum in November 2011. An important difference between the two laws is that the Ohio law included firefighters and police officers, groups excluded from the Wisconsin legislation. Opponents of the Ohio law could charge that it would negatively affect staffing in protective services (Niquette and Rosenkrantz 2011).
- 31.
President Obama characterized the Walker bill as an assault on unions (Greeley 2011).
- 32.
While public attention seemed fixated on the upheaval in Wisconsin, the legislature in Ohio passed legislation that was even more antiunion. The Ohio law banned health care benefits from bargaining, included firefighters and police, and allowed cities and school boards to impose their own final offers on unions if there were impasses in collective bargaining. The Ohio law did not survive a voter referendum (Maher and Nicas 2011; Union bashing 2011). One of the important side effects of the state-level attempts to restrict the bargaining rights of public employees has been the movement of union political funds to fight antiunion legislation and launch recall votes, and away from the presidential and congressional elections. Protecting bargaining rights became the highest political priority of labor unions (Trottman and Mullins 2012).
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Chaison, G. (2012). The Second Wave of Concession Bargaining: The New Ultra-Concession Bargaining. In: The New Collective Bargaining. SpringerBriefs in Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-4024-6_4
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