Open Letter to the Bronson Community
Douglas Autotech Corporation has done business in the Bronson community for over a hundred years. Our competitive challenges have never been greater. Every one who lives and works in this region knows how difficult mere survival has become for area manufacturers, especially in the auto industry. Parts manufacturers are failing with regularity.
After losing $31.5 million since 2005, Douglas opened its books to UAW auditors before contract negotiations began early this year. The UAW experts confirmed the company’s economic difficulties in language seemingly designed to tell Local 822 that changes in antiquated contract terms were needed to turn Douglas around.
Local 822 acknowledged in writing on July 28, 2008 that Douglas is a “good corporate citizen” and has a history of “fair bargaining” and “fair treatment” of employees. Douglas negotiated in good faith for many months in an effort to save its business. In the days before the contract expiration, Douglas’ President made direct personal appeals to the Local 822 bargaining committee to extend the contract for 90, 60 30 and 19 days, while the parties negotiated. Each extension offer was rejected. The very people who fought the internal corporate battle in Japan to keep the Bronson plant open and jobs here in the face of huge losses were met with ugly references to “1941” and threats to “bankrupt [Douglas] now, rather than later.”
Instead of negotiating the needed changes, the Union illegally commenced a strike which for the expressed purpose of bankrupting the company! Specifically, to take advantage of timing that involved the company’s lack of preparation for a strike, the union led the workforce out in the midst of the worst economic climate in a generation, to make good on the threat. The Union’s illegal work stoppage violated a fundamental precept of the labor law: that federal mediators be notified of a strike at least 30 days in advance of any work stoppage, so they may try to bring the parties together before the strike weapon is implemented.
As members of the community now likely know, Douglas has terminated the strikers for their illegal acts and continues its operations with other members of the community manning its operations. This action does not reduce Douglas’ commitment to the community. Continuing its tradition as a good corporate citizen, the company provides this detailed statement of its perspective on this matter of great importance.
The UAW International Confirmed
Douglas Autotech’s Precarious Financial Position to Local 822
As Douglas entered negotiations in the Spring, it faced an avalanche of competitive challenges. Sales declines, material increases, global competition- all contributed to Douglas’ need to fundamentally alter its operating pattern.
Douglas opened its books to UAW experts and invited the union’s scrutiny of our financial status. Though the UAW-emblazoned report contains some conclusions the company would dispute, it confirmed that losses escalated from $5.5 million in 2005 to $8 million in 2006 and to $17.8 million in 2007. Douglas needed and obtained $25 million from the parent company to keep the business solvent. The language from the UAW experts reads in relevant part:
“The company has been struggling financially over the past few years and agreed to allow the UAW to review their financial records…
Sales have declined in each of the past three years and include an 8% drop from 2005 to 2006 and a 31% drop from 2006 to 2007…Cash flow from operations has been extremely poor due to the annual operating losses…This would be even more of a critical issue if it were not for the financial support of the parent company who continues to fund the business operation as needed. DAC generated negative cash from operations in 2006, which required the need to tap their line of credit in the amount of $9 million. The company has only $500,000 left on their $19 million line of credit as of February, 2008.
Perhaps some economic gains can be secured in return for changes in the work rules, if the membership is willing to grant management some of the changes they are asking for. The poor financial performance of the company makes it difficult to secure economic improvements in the near term for our membership, but if the current management team can turn things around, like they hope to do, then perhaps we can propose these improvements at the back end of the contract.”
The UAW’s own report confirmed managements’ expressed belief that operating under current terms of the collective bargaining agreement would inevitably bankrupt the company. That prospect is very real. As the big three slashes payrolls, cuts benefits and shutters factories, auto suppliers have been filing bankruptcy with regularity: Plastech, Dura, Collins & Aikmen, Dana, Excello, Tower Automotive, Delphi, Progressive Molded Products, Dynamerica. Meridian,.
DAC’s Bronson Plant Required A Modern Operating Agreement,
Not One Fashioned Decades Ago, Which Institutionalizes Inefficiency
No company can survive in 2008 with contract provisions drafted when component suppliers had a captive U.S. market, and all competitors had essentially the same labor contracts. During pre-strike meetings, the Local 822 leadership proudly waived their ancient agreement at our Japanese owners to emphasize that some of the contract provisions had been in effect for years and years. In an era of instant communications, rapid transportation and intense global manufacturing competition, antiquated contract terms needlessly drive up cost of our product, drain resources from quality and product improvement, and impair our competitiveness.
It is no longer the case that our competitors operate under the same conditions and costs. Not only foreign suppliers, but other U.S. plants can operate much more efficiently. Douglas’ Hopkinsville, Kentucky plant provides a good example and they pay U.S. wages. The Kentucky plant operates under modern operating principles, where the hourly employees flexibly work with management and make suggestions to increase plant production and efficiency. In Kentucky, management and hourly employees work together as a team. And the Kentucky operating pattern has brought results: the Hopkinsville plant won the 2007 Most Improved Production Part and Most Improved Service Parts Award for Mitsubishi and was sited as Best Overall Quality Performance for our parent company. The Kentucky team focuses on overcoming our competitors and refuses to cast management as the enemy.
In contrast, the collective bargaining agreement at the Bronson plant until April 30, 2008, actually institutionalized inefficiencies. Two examples (among dozens in other contexts) relating to “work classifications” illustrate how:
- For a workforce of just 115 hourly employees, the contract provided for an amazing 38 separate work classifications and that the company may not force an employee to work “out of classification.” Thus, if there is only three hours of work for classification “A” employees, but too much work in classification “B,” the contract required that:
- Workers in “A” classification be paid for eight hours though they did nothing for five hours;
- That “B” classification work overtime at a time and a ½ rate to cover the work
Paying employees to do nothing while paying other employees time and a half is simply bad business.
- The contract provided for three material handling classifications despite the small workforce. On a Saturday before the contract expiration, when there was work for a mere 15 employees, the Company was contractually required to bring in two hilo drivers (at time and ½), though one would have sufficed. Again paying two employees to do work that easily could be handled by one is simply wasting money.
Virtually dozens of other examples could be cited. These exemplify the “work rules” that the UAW International auditors suggested needed to be changed.
Long-Time Labor Supporter and 1972 Democratic Presidential Candidate, George McGovern, Cautions That Casting Business As “The Enemy” is a Mistake
When Facing Global Competition
Long-time labor supporter and 1972 Democratic candidate for President, Senator George McGovern, published an article in the L.A. Times, http://articles.latimes.com/2006/may/22/opinion/oe-mcgovern22, which was re-printed in the Oakland Press on June 11, 2006 making the point that companies cannot compete today under contract provisions crafted decades ago:
“I have never wavered in my support for policies that…improve the standard of living of American workers…As a lifelong liberal,…I have always been a supporter of the labor movement. But lately, I have seen developments that have me worried.”
McGovern noted that Delphi had gone bankrupt because of its labor costs compared to its competitors, and the big three layoffs. McGovern, noting that labor contracts are the product of unions getting “more” for workers during successive bargaining, stated:
“’More’ has unfortunately become ‘too much’ in a global and far more competitive economy. Many of my friends will consider this view heretical. But it is based on reality. Some progressive union leaders, facing this economic reality, have come to the same conclusion. Others are holding fast. Their behavior is a function of internal politics and sheer habit.”
Commenting on the circumstances of companies much larger than DAC, McGovern wrote:
“Many large corporations operate with razor thin profit margins[,] as competitors, both foreign and domestic, attract consumers by offering lower prices.”
Douglas could only wish for “razor thin profit margins.” As confirmed by the UAW auditors, we lost at least $31 Million over the past three years.
McGovern’s closing words sound like the “lets work together against our competitors” team philosophy that Douglas has achieved in Kentucky and seeks in Bronson:
“[U]nion leaders who still see American businesses as the enemy must update that vision.”
Douglas has never understood how or why the business that has provided competitive wages and benefits to its workers and their families since the turn of the last century could be considered “the enemy.”
Douglas Never Wanted A Labor Dispute
Pursuant to long-standing federal labor law, the party to a labor contract (management or the union) that wishes to terminate or modify the agreement formally commences the bargaining process by sending an “8(d)(1) notice” to the other party, and is known as the “initiating party.” The union provided the notice to the company on February 19, 2008.
In hindsight, it should have been apparent that the union was committed to a strike strategy. Management bargained in good faith. A letter received as recently as July 28, 2008 from the Local 822 Executive Board confirmed as much:
“Douglas Autotech has been a responsible employer and a responsible corporate citizen of Bronson, Michigan, for many years. In the 1990’s Douglas Autotech was purchased by the Fuji Kiko Group and the new owners continued the tradition of fair bargaining with Local 822 and fair treatment of the workers.”
This strike was a work stoppage of choice- the UAW’s choice. After several months of bargaining and hundreds of hours of management preparation, Local 822 walked out with the following offer from Douglas on the table:
- Work for Bronson Plant – A three year commitment to keep local work local;
- Wage Increases – $1/hour over the life of the agreement;
- Retirement Incentives – Up to $10,000/employee for high seniority employees;
- Health Care – Health care benefits on par with the salaried team;
We do not know if this offer was ever taken to the membership. These proposals went significantly beyond what was prudent, but were made only to reach agreement and avert a strike.
The negotiations were marked from their inception by the UAW’s intransigence and over-the-top rhetoric. Crucial weeks were wasted on the UAW cataloguing the alleged stupidity of managers that are no longer with the Company, and criticizing present management. While the Douglas negotiating team sought to avoid a work stoppage, the local union dithered over cost of living allowance proposals, requests for even more classifications and asking for even more time paid off the clock. As Douglas’ President and bargaining team plead to keep talking, the union commenced its illegal strike.
The timing of the strike was calculated to maximize the damage to Douglas at a time when the Michigan auto industry is in peril, auto suppliers are failing with regularity and during the worst Michigan economic climate in memory.
Contrary to statements that have been made in the press by union officials, Douglas made no preparations for a strike until immediately before the contract expiration. Indeed, security services were only contacted on April 29 as time was running out. Nobody at Douglas was contemplating a strike before the end of April.
The Union Violated Federal Law By Striking
Since the federal labor law was written in 1939, it has absolutely required that an “initiating party” provide written “8(d)(3)” notice to the Federal Mediation and Conciliation Service at least 30 days before a strike is called, so that the FMCS can appoint a mediator to bring the parties together before that most drastic economic weapon is utilized. This provision exists because everybody involved in bargaining knows that resort to the strike weapon raises emotional barriers to agreement.
At 11:55 p.m. on April 30, 2008, Local 822 provided written notice to DAC that it would go on strike at 12:01 on May 1, 2008. Messages posted on the topix.com chat-site about the strike suggest that half the membership was unaware that the strike would be called. DAC management doesn’t know if that is true. But, those who were absolutely required to be notified by union officials- the FMCS- were not notified, although it was only confirmed by Douglas much later. Thus, the union violated federal labor law by striking without notice. Federal law provides for drastic penalties: the strike is illegal and the strikers are stripped of the protection of federal labor law.
Douglas hopes that the community understands its perspective of these events. The company president literally plead with the union to extend the contract while the parties bargained. The union illegally called a strike to take advantage of timing that involved the company’s lack of preparation so as to maximize damage to and possibly bankrupt the company in an already precarious economic climate.
The Bronson Plant Actually Performed Better After Local 822 Struck
Management scrambled to deal with the strike. Initially, office personnel at the Bronson plant manned the production lines. In general, those office employees were completely unfamiliar with the machines. Later, office people were replaced by temporary workers. Only 50 replacements were able to handle the work that had been performed by the 115 hourly workers that walked out.
Confirming management’s belief that contract provisions impaired the performance of the plant, the inexperienced office workers and then the temporary workers immediately began out-producing the experienced Local 822 members. In fact, our “900” line recently set a single shift production record in excess of 300 components. Hourly employee absenteeism, which had averaged 12.7% in 2006, 11.7% in 2007 and 10.9% in January-April, 2008 (with absenteeism in some months as high as 17%, 18% and 22%), declined to 3.4% after the strike. After years of struggling with on-time delivery, we have held 100% on time delivery for six consecutive weeks.
Though management feared a strike, it turns out that striking was not much of a weapon. Management is thrilled with the current performance of the plant and the replacements. Today, our Bronson workers identify bottlenecks, point out inefficiencies and have responded well to “Kaizen” continuous improvement methods. In other words, since the illegal strike, the Bronson plant has achieved the team philosophy it has sought and is on path to reverse historical losses.
Apparently Alerted That Their Strike Was Illegal,
Local 822 Sought to Return To Work, Reserving The Right to Strike Again
By May 5, 2008, DAC management was still not aware that the union had violated the law. The union never responded to the company’s information request that they provide a copy of the 8(d)(3) notice that was supposed to be sent before the strike. On May 5, the union suddenly offered to return to work, but reserved the right to again go out on strike in the future. Under the belief that the union simply wished to employ an on-again/off-again strike strategy that would make running the plant with replacement workers impossible, management resorted to management’s equivalent of the strike, a lock-out. On that same day, the Union sent the 8(d)(3) notice to the FMCS, thus illustrating that the union only sought to return because it recognized that the strike was illegal
As Contemplated By The Law, The Illegal Strike Has Enflamed Passions
DAC has fulfilled its obligation to continue to bargain with the union, even after obtaining confirmation that the strike was illegal, and in fact agreed to a thirty day cooling off period. During that time, the company has been watchful for any mitigating circumstances that would suggest a course of action other than termination for the illegal strike designed to capitalize on the company’s vulnerability.
Instead, the people committed to Douglas’ survival have been followed from work, terrorized in their homes, and subject to the vilest language imaginable. Our proud African American employees have heard the ugly call of “nigger” and “watermelon.” Our Japanese owners have heard shouts of “Remember World War 2” and “Jap” as UAW pickets told them to “go home.” Indeed, just last week counsel for the UAW demeaned the Japanese managers who have struggled to keep the Bronson plant open against massive losses as “guests” who had somehow “disrespected” this community. Perhaps most despicably of all, union leaders have screamed their hope that someone “has their way with” (rape?) the wives of management personnel on their way to their jobs.
Autotec’s Decision To Discharge The Illegal Strikers
Does Not Reduce The Company’s Commitment to The Community
By now, readers of this message undoubtedly know that Douglas has sent letters to the illegal strikers formally terminating their employment status. This action does not reduce Douglas’ commitment to the community. Though clearly, a more efficient plant will operate with fewer employees, a more efficient plant poses the greatest prospect for long-term survival and continued jobs in the community.
Normally, the company would not make statements about its business affairs, especially since the prospect of contested legal proceedings looms. However, as Local 822 recognized as recently as last week, Douglas Autotec “has been a responsible employer and a responsible corporate citizen of Bronson, Michigan, for many years,” and we thought it important that you know the state of affairs that affect both our company and the community.
Links about auto supplier bankruptcies:
(above link: 16 auto suppliers filed for bankruptcy last year)