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Grocery strikers' difficulties mount

Union predicts changes by Feb. 12

By Jim McLain, jmclain@VenturaCountyStar.com
January 18, 2004

For going on four months now, six words have been repeated almost like a mantra around United Food and Commercial Workers Local 1036's Camarillo headquarters:

"One day longer, one day stronger."

Coined by long-ago labor leaders to be catchy, easily remembered and motivating, the slogan is seen and heard almost constantly. It is posted on the walls, printed on almost every handout, recorded almost daily for callers to the UFCW's "Strike Update Hot Line" and recited often at rallies and on picket lines.

But as the Southern California supermarket strike-lockout, which has turned into the roughest and longest fight in the UFCW's history, enters its 99th day and 13th week today, the line might be ringing hollow for some. Consider:

  • Not a single iota of progress was made in 16 days of talks aimed at resolving the conflict, 12 of them led by the federal government's top mediator. Moreover, no new talks are scheduled.
  • Weekly strike pay the union had to reduce in November from an average of $200 to $175 will have to be cut to $100 if the stalemate continues into mid-February, Local 1036 President George Hartwell said, because a $12 million war chest is gone and borrowing options are limited.
  • The number of pickets pounding the pavement in Local 1036's six-county coverage area has dwindled from an estimated 7,000 at the outset of the dispute to about 4,000, according to Hartwell. While a majority of workers remain committed, union members report growing demoralization on the picket lines.
  • Wall Street analysts such as Merrill Lynch's Mark Husson are predicting the three supermarket chains will shrug off expected fourth-quarter losses of $200 million or more each from the work stoppage. Husson noted in a Jan. 7 analysis that he expects the strike to be over in "about a month or so." Analysts are forecasting stock-price increases in anticipation of long-term gains because they believe the companies will soon impose big labor cost-cutting measures.
  • While business at all three chains has been badly disrupted and remains well below pre-strike levels, the companies insist they are turning that around. Mostly untrained replacement workers are improving, officials said, and nearly complete merchandise lines are being restored at a growing number of markets. Over the past two weeks, the number of strikers crossing picket lines to return to work at Vons and Pavilions stores has surged, said Vons spokeswoman Sandra Calderon.

Long and rough

Idling about 70,000 grocery workers from Bishop to San Diego, including about 3,500 in Ventura County, since Oct. 11, this labor dispute is one of the longest in recent U.S. history and the roughest Southern California has seen in many decades, said Kent Wong, director of the UCLA Center for Labor Research and Education.

It pits members of seven UFCW locals against Safeway Inc.'s Vons and Pavilions, Kroger Co.'s Ralphs and Albertsons Inc., all huge companies with stores throughout the United States and Canada that generate annual revenues that top $30 billion each. With about 1.4 million members, the UFCW is North America's largest private-sector trade union, a formidable opponent, but perhaps not powerful enough.

Contract talks began in July, but so far the UFCW has been unable to pressure the companies into even one concession. Its picket lines failed to shut down any of the 859 affected stores. When the union withdrew pickets from Ralphs stores as a goodwill gesture to shoppers Oct. 31, all three companies began sharing the increased sales revenue. The union contends the arrangement violates antitrust laws, and the Attorney General's Office is investigating. But the revenues are going up, according to Ralphs, and the companies are still sharing.

Even when members of the powerful International Brotherhood of Teamsters refused to cross UFCW picket lines at the companies' distribution centers during four weeks of the all-important holiday season, some supplies got to stores. Some say the union might be running out of options.

"I don't know if they have any more cards to play now. I believe the pain is growing on both sides, but more so on the union side with the expiration of health benefits coming up and continued uncertainty on whether workers will ever return to work," said David M. Smith, an associate professor of economics at Pepperdine University in Malibu. "The union's position hasn't strengthened certainly. Over time, it's more likely weakened."

Union leaders said they knew from the outset they were in for a tough fight and prepared early. As the companies recruited replacement workers, worked out a revenue-sharing arrangement and lined up independent truckers to move supplies, UFCW members were assessed $2 a week for nearly a year to build a strike fund, were advised to pay down debt and save all they could.

Pay for union representatives and the UFCW's hourly employees was cut 20 percent while attorneys, accountants and other contractors voluntarily reduced their fees by one-third. Hartwell and the local's three other top leaders have been paid the wages of picket captains -- $225 a week -- since the action began.

Hartwell, who is paid $137,000 a year to head the 12,000-member local, said he took payment for accrued leave until late December. The union was ready for a fight, he said, but not for management's intransigence.

"Nobody was really prepared for this strike. We were prepared for 30 days, 60 days, but now I've gone through $12 million," said Hartwell, Local 1036's president since 1992. He said the local has distributed about $400,000 contributed by the AFL-CIO and the UFCW International Union's hardship funds to help members with survival costs, such as rent, mortgage payments, utility bills and car repairs.

Picket-line tension

Tensions have run high since the walkout began. Union members report frequent verbal abuse, but so do some customers and replacement workers. Customers complain that pickets photograph them and block their way, while some replacement workers allege pickets have keyed their cars or put spikes beneath tires. Often there isn't much police can do.

"If it's nothing significant, if no crime occurred and we're not concerned about someone's safety, then typically we're not going to file any kind of police report," said Ventura Police Lt. Bryan Roberts. "If a car is keyed, though, that's vandalism. ... It's a crime that's occurred and we will take a report ... but unless it's witnessed by someone, there's not going to be an arrest made."

From the start, the dispute has focused on spiraling health care costs and pension benefits. The companies say they cannot compete with nonunion food sellers such as Wal-Mart Stores Inc. without significant labor cost reductions. The union contends the grocers' proposed cuts are too deep.

Management wants a two-tiered plan in which wages and benefits for new hires would be well below those for current employees. The reduced employer contributions for new workers eventually would not cover skyrocketing health costs, the union contends.

In late December, the UFCW proposed health-care co-payment increases that it claimed would save the companies at least $500 million over the life of a new three-year contract. Analyst Husson of Merrill Lynch estimated the plan would cover 30 percent to 50 percent of the cuts the companies want, but management negotiators immediately rejected the offer and broke off talks. UCLA's Wong said the proposal should have at least triggered some hard bargaining.

"Under normal circumstances, that would have been seen as a big change in the posture of the negotiations, but for management to just flat-out reject it shows that they are really, to be honest, out for blood," Wong said.

"The union is in a very difficult position. Management seems pretty intent on extracting drastic concessions from the workers and has pretty much decided that they're going to try to stick it out as long as they can to break the backs of the workers, to make sure that their savings are dried up, that their health care benefits have expired. It's a pretty brutal way of proceeding."

Another strike settled

The UFCW settled a nine-week strike against Kroger Co. involving 44 stores in West Virginia, Ohio and Kentucky in mid-December that also focused on health care costs. Spokesmen for the union and Kroger said that dispute is not comparable with Southern California's because it involved only about 3,300 workers in an area with a much lower cost of living.

Part-time workers there do not get health care coverage. The union agreed to cap annual health care contribution increases for other workers at just 2 percent. The big difference, though, Wong said, was that Vons and Pavilions owner Safeway Inc. was not involved. That company has taken a lead role in the Southern California fight, aggressively demanding union concessions.

Safeway CEO Steve Burd has reportedly said he would try to sell the Vons and Pavilions chains if a new contract fails to reduce costs adequately.

"Safeway is the one that's really driving this, and Steve Burd in particular is the one who has developed this pretty much scorched-earth policy," Wong said. "He wants to make sure the workers are brought crawling back to the table. That's his plan."

Pinning hopes on reports

The UFCW, Hartwell said, is pinning its hopes on earnings reports the companies should begin releasing later this month that are expected to show huge 2003 losses caused by the strike-lockout. In a tersely worded mid-November statement, Albertsons, the country's No. 2 food and drug retailer, withdrew its forecast for a 2003 annual profit of $1.70 to $1.75 per share of common stock, saying it could make no forecast "due to the magnitude and uncertain duration of the current labor dispute."

In a news release issued Thursday, the Los Angeles County Employees Retirement Association, which owns stock in all three companies, said its board estimates total losses will be about $1 billion. UFCW leaders said they believe shareholders will be demanding action no later than Feb. 12, the deadline for filing adjusted year-end financial reports.

"The things that we're looking at now are the things that make these companies' CEOs move," said Hartwell. "I really think once those numbers come out and the stockholders see exactly what has happened here and how much money and profit they have lost, that stock will take a tumble, and I think you'll see the CEOs taking a second look at this situation."

Analyst Jeff Tryka of the Delafield Hambrecht Inc. brokerage in Seattle doubts big near-term losses will make many investors nervous. He sent his clients a "hold" recommendation on Safeway's stock last month and a "buy" on Albertsons. He does not cover Kroger.

Stores in better shape

"All of these companies are of a size that, even with the strike ... they can weather this sort of a storm. ... This situation obviously is not good for the companies, but it presents no real danger to them," Tryka said. "The stores are probably in a better financial position than the union or their workers are. ... You're talking about a $30 billion business versus either workers or the union."

Management, Tryka said, is right to be concerned about Wal-Mart's plan to open 40 so-called Supercenter outlets in California by 2009. Full-line grocery departments would be combined with Wal-Mart's traditional retail stores. The big-box behemoths already are in 43 states and have turned the No. 1 retailer into the leading food seller as well. California's first Supercenter is scheduled to open March 3 in La Quinta, near Palm Springs, Wal-Mart spokesman Peter Kanelos said.

"It's sort of like when you hear a warning of an upcoming storm, but it's sunny out. Wal-Mart's coming to California, and before you know it they're going to have 40 Supercenters," said Tryka, who does not own stock in Wal-Mart or any of the grocery companies, and whose firm does not do investment banking for them.

"Right now you don't see anything so it's easy to say there's really no threat ... but in reality, based on every other market where Wal-Mart's come in to the supermarket segment, there's been a very significant impact on the competitors ... an impact on wages and ... overall pricing at retail. It's something that the management of the supermarket chains cannot ignore."

Representatives for the chains readily admit they will have to work to get thousands of customers who have been shopping elsewhere back.

Steve Portigal, who runs a Bay area consulting firm that studies consumer behavior, said the dispute will leave a bad taste in many customers' mouths, but he believes most will return eventually. Probably supermarket management will try to be more welcoming, he said, with more greeters at the doors and managers on the floor to talk with shoppers.

What they really need to do, he said, is offer deeply discounted prices for a few weeks. That will bring customers in, and they will stay because for most people the big markets are easier, more convenient and usually less expensive. To most customers, that's what is important.

"Grocery stores like to pretend that they have kind of a lifestyle relationship with their customers, but the fact is it's kind of a faceless place to grab what you need, to go do what you have to do," Portigal said.

'Not a boutique'

"It's not a boutique. If these were boutiques, like my favorite jewelry store or hair salon where I have a much more personal relationship, when you make it difficult for me to do business with you, I'm going to go elsewhere, but when it's a convenience factor, I think that's what's going to overwhelm ... they're going to do what's best for them."

Still, managers of uninvolved stores who have seen their business boom over the past 13 weeks believe many of their new customers will stay with them. Business doubled at the independent Trade Winds Market in Oxnard in the first few weeks of the strike, Manager Joe Silva said, and is still about 30 percent above normal.

He's stocking items such as goat's milk and several unusual varieties of cheeses and cereal brands that he did not carry before the walkout. He is confident he will continue seeing many of those new faces.

"Customers are kind of disgusted with everything that's happened. Regardless of who's right or wrong, they're going to blame the store itself," Silva said, "so I think we will keep a lot of the customers."

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