As Unions Fight Irrelevance, Caterpillar Racks Up Profits

IT'S another gray, wintry morning here at the factory gates of Caterpillar Inc., as picketers press on with what union leaders call the most momentous strike in years.

Strikers warm their hands over blazing wood, looking up occasionally from the flames to jeer at managers beyond the gates.

As their union leaders back off from original demands, the picketers stare silently into the fire, mulling over a chilling message from management: Caterpillar can thrive without organized labor. Indeed, the world's biggest manufacturer of earth-moving equipment, based in Peoria, Ill., logged record fourth-quarter sales and earnings in 1994, despite the United Auto Workers (UAW) seven-month-long walkout.

The irrelevance of American unions rings truer today than at any time in more than 60 years. With only 11 percent of private-sector employees organized, many firms can shrug off a strike.

Some analysts say unions could represent as little as 5 percent of the private-sector labor force by 2000.

The steady decline of unions has severely weakened the leverage of labor. It is one factor in the decline in wages and reduced job security for semi-skilled and unskilled Americans, say academics and federal officials.

``Workers have a feeling that management is running over their lives like a herd of untamed buffalo,'' says Joel Rogers, a professor of law at the University of Wisconsin in Madison.

But the American worker is apparently growing less combative, according to a ``Worker Representation and Participation Survey'' of more than 2,400 workers. Professor Rogers co-directed the survey, which was published last month. A typical laborer today is willing to forgo the autonomy and defiance of unions and cooperate with management on joint committees.

Last Friday, a day after Caterpillar declared its banner earnings, the UAW and Caterpillar met with a federal-labor mediator and agreed to begin contract talks aimed at ending the strike by some 10,000 workers at eight plants.

Many analysts view the agreement as a triumph for Caterpillar. After watching Caterpillar prosper and thousands of UAW workers cross the picket line, the UAW dropped its insistence that talks over a new contract must follow resolution of 101 cases of alleged unfair labor practices. It has apparently backed off from its hard-line stance, which if successful, might have halted the union's membership decline.

As unions have sunk, so has the middle class. The disparity of incomes among Americans is greater than at any time since the Great Depression, according to Census Bureau figures.

``This strike will determine the direction of middle-class America for the next couple of decades,'' says John Yarbrough, president of UAW Local 145, which organizes at the plant in Montgomery.

At the factory gate, striker Clyde Slamans says, ``If Cat wins, it means you'll have a few rich people and the rest of us will be in the poorhouse, like during the 1930s; that's the road we're headed down.''

Academics and other analysts disagree over why unions are crumbling. Some say the main cause is fierce global competition, which pushes companies to employ cheap, usually non-unionized labor. They also note a steady decline in manufacturing industries where unions were strong, such as steel and textiles. Others contend that the meltdown of unions is due to toothless labor laws, management antagonism, and complacency among union leaders.

``The day of private-sector unionism is really in the past,'' says Leo Troy, an economics professor and labor expert at Rutgers University in Newark, N.J.

Union leverage has not entirely waned. As the UAW softened its stance with Caterpiller, it coerced General Motors Corporation into concesssions with a three-day walkout at GM's AC Delco Flint East complex in Flint, Mich. The strike created shortages in parts that forced all or part of nine other GM plants to close.

Still, remaining union power is isolated to certain industries. Even in the auto industry, union influence is steadily eroding as automakers farm out more elements of a car for production to companies employing non-union workers.

There is no sign government will come to the rescue of unions. Organized labor will probably face cool treatment from the new Republican-dominated Congress. Even in the past two years, unions were vexed by how the comparatively sympathetic Clinton administration and Democratic-led Congress snubbed union views on trade and labor bills.

``The fundamental problem for labor-law reform is that it lacks a public constituency and a committed and credible agent for putting it through,'' Rogers says.

A report by the Clinton administration's labor-policy commission released Jan. 9 disappointed labor leaders. The board called on the government to better protect unionized labor from hostile employers. But it skirted the bedrock issue of how to halt the decline in incomes.

Academics say workers increasingly will be on their own. That could lead to the rise of employee-participation committees. Free-market economists say the committees would bring labor and management together to discuss how to improve production. Such forums would parallel ``employee-involvement'' programs, which many companies already sponsor to improve quality and encourage worker participation.

Labor advocates say the committees are thinly veiled company unions, which, they note, are illegal. They say the committees should offer workers a legally endowed way to negotiate with managers on investment, plant location, and other matters beyond the traditional collective-bargaining subjects. Proponents of the free market call such European-style works councils a Trojan horse for unions.

Like many US companies, Caterpillar has pursued a business strategy that has nudged American workers away from defiance toward compliance. It has responded to rising global competition by manufacturing at cheaper facilities abroad. Moreover, it has substituted high technology for skilled labor and hired non-union workers. (Caterpillar executives declined interview requests.)

Through a seven-year, $1.8 billion campaign in factory modernization that ended in 1993, Caterpillar boosted efficiency by reducing manpower. Also, by relying on imports from factories in Brazil, Japan, and Europe, Caterpillar is better able to meet demand and smooth out disruptions from the strike. And it has hired 1,100 new employees and 4,730 contract and temporary laborers at lower pay than the roughly $17 hourly wage UAW workers earn.

The union walked out after compiling 101 complaints of intimidation, harassment, unjustified dismissal, and other unfair labor practices.

Caterpillar says the UAW posed the grievances to coerce the company into signing a contract patterned after that at other companies in the industry. But picketers say their jobs - and a contract - come second to the principle of fair labor practices.

``We're out here for our ideals and for future generations,'' Mr. Slamans says at the factory gate, as a freezing rain pelts a UAW shelter.