LLPOH’s SHORT Stories # 1

In recent days, there have been several discussions recently on this site regarding unions and their activities. I have had a bit of experience in dealing with unions over the years – and none of it has been positive. Following is one of my experiences with unions.

In 1988 I joined a major international company, and was brought in, along with several other senior managers, to turn around a failing major consumer goods facility located in a small, rural town of 10,000 in the Midwest. The facility employed approximately 2000 people, and was heavily unionized.

The history of the facility was this: the original company was established approximately 60 years prior. A range of products – all heavy metal goods – were manufactured over the years. The original company was privately owned. The founder passed the company to his only son in the 1950’s. The son married, and the couple was childless. The company was by far the major employer, and the couple treated the employees as though they were family, and never attempted to maximize profit. The employees took advantage of this, and made substantial demands, always granted, during each contract negotiation.

The couple of course aged, and there were no heirs. In the early 1980’s the man died, and the wife sold the business to the multinational, as she wanted to ensure its continuation, for the welfare of “her family”.

At this point, the company employed approximately 2,000 people. The average wage for, primarily, unskilled assemblers was a bit more than $20 per hour. The company was by far the biggest employer in the area – the town was almost 100% reliant on the company. House and property prices were near the highest in the state. Schools were well funded. There were signs of prosperity everywhere – cinemas, restaurants, beauty parlors, etc. flourished.

Unfortunately, the facility was not making a profit – it had begun to lose money owing to overseas competition and the steadily rising costs associated with granting the employees their every demand. The new owner had bought the company not for its profits but for its customer base. The new management team was brought in to make it profitable, or to close it down. The men in black hats arrived.

Within several weeks we had come up with the solution. The parent company was prepared to let the facility continue, but it had to generate an appropriate profit. Wages needed to drop to a more appropriate level of $15 per hour, and serious investment in current technology needed to be done to drop the workforce substantially – to approximately 1000 employees. The savings looked for were in the vicinity of $50,000,000 per year. Otherwise, the facility would be closed, and a new facility would be opened in North Carolina, with wages of $10 per hour, and where generous subsidies from state and local governments existed. It was expected that the savings from moving to North Carolina would be approximately $65,000,000 per year. The parent company was prepared to keep the Midwest facility open and wear the $15,000,000 difference – a testament to its goodwill, in my opinion.

We had a contract with the union that was expiring inside of a year. We called the union representatives together, and laid this out for them – exactly as above. We told them it was a non-negotiable situation, and the company had to start making a profit. They laughed at us and walked out. A few weeks later, we got together with them again. By this time they had put together their list of demands – a six percent a year increase over current wages, better benefits, etc. Again we told them what was required – $15 per hour, etc. Again they laughed at us and walked out. They said it was nothing more than a bargaining ploy.

We then organized an off site meeting with the entire workforce. We put together and presented the facts as laid out above – serious restructuring of wages, work rules, and reductions in workforce numbers would be required, or the plant would be shut and production moved to N.C. We gave them 2 weeks to consider, and then met again offsite for their vote. The union representatives -local/state/national – told them that it was a negotiating ploy, that the factory would never be shut, and that they must never take a backward step. All 2000 employees voted to reject the terms.

We immediately implemented the plan to move to North Carolina. We signed contracts and the plant began to be built. We had no further conversations with the union or the employees. Six months later, a few months before the contract was to expire, the union showed up to negotiate the new contract, and had their same demands.
We told them that the plant was to be closed, per our previous meeting, and that we would continue under the current terms until that time. They laughed at us once more, and said it was a bargaining ploy. They did, however, decide to check out whether the plant was actually being built, and sent a team down to N.C. to inspect and take film. What they found was that the entire shell of the facility was up, and some equipment was actually moved in. This of course panicked them.

The came back the next week to meet with us, and had dropped their demands, and wanted us to sign up to an extension of the current contract. We told them the plant was being closed. Word got out to the membership that the factory was indeed being closed, and the place exploded in a major crisis. The next week they came back again, under enormous pressure from the membership, offering to accept our original terms of $15 per hour, etc. We told them so sorry, the plant is being closed – it is too late.

About 12 months later we fired the first 500 employees. We fired another 500 two months after that, another 500 two months after that, and the final 500 two months after that. We padlocked the gate and walked away.

I revisited the town several years later. Property prices had plummeted. The town center resembled a slum. The entire town had gone to rack and ruin. The decision not to renegotiate terms destroyed the entire town and its surrounds.

These are the lessons I learned from this experience:
1) Unions do not care about the health of the company.
2) Unions do not care about their local membership. Unions believe they must hold the line at every facility less it flow through to their national organization.
3) Unions believe that the jobs lost at one facility will ultimately be picked up at another, as the total work will stay the same. This has proven to be absolutely false.
4) Management is prepared to give away almost anything in order to keep the peace. When it comes unstuck, it will be someone else’s problem.
5) Unions are prepared to lie to the local members in support of their national and state goals.
6) Members will listen and believe almost anything the union says.

Does this sound familiar? These kinds of mistakes are being made everywhere by our “leaders”. People everywhere are being mislead about the consequences of decisions being made. People believe what they are told, and the more outrageous the lie, the more likely they seem to believe it. People hang on to failed causes at their long-term detriment. It is happening today, everywhere.

I was the guy in the black hat. I closed the facility, but the one in North Carolina is thriving. Where are the guys in the black hats that we so desperately need right now to address the critical issues facing the country? Who is going to tell the people the truth before it is too late? Would they even listen if told? I do not see it happening. The scenario above will play itself out on a large scale throughout the country. It will be a painful experience.