labor unions across the country are at a crossroads.
Negotiations to end a months-old strike against two grocery store chains owned by Safeway Inc., Vons and Pavilion are at an impasse. Meanwhile,
contracts for workers in other regions — including
Baltimore — are set to expire early next year.
If, in the end, grocery store clerks prevail on the
retailers to continue
to pay for health-insurance coverage, union
negotiators in other areas will have an advantage.
But if Safeway — which is based in Pleasanton, Calif., and
has about 6,000 workers in Maryland — is able to successfully
shift most of the costs to workers, “it’s going to be
like raw meat for the chains here,” said Bill Barry,
director of labor studies at Baltimore County
Community College.
At the center of the dispute with the United Food and
Commercial Workers Union is the growing influence
of Wal-Mart Stores Inc., the world’s largest retailer.
Based in Bentonville, Ark., Wal-Mart is
squeezing retailers’ profit margins on products
ranging
from toys to groceries.
The company, the parent of the Sam’s Club wholesale
grocery chain, plans to open food stores in California
next year.
And as supermarkets prepare to battle Wal-Mart, they
are struggling to find ways to keep costs low without
cutting payrolls. Self-checkout machines and weekly
specials, however, can only go so far.
More broadly, the California labor struggle is
considered a microcosm of the current state of the nation’s economy and for that reason it is being
watched by both union leaders and industry officials.
The latest round of talks with a federal mediator
ended in impasse on Dec. 19. Workers have been on
strike at the Safeway-owned stores since Oct. 11. In addition, Albertson’s Inc., a grocery chain based in Boise, Idaho, and Ralphs, owned by Cincinnati-based Kroger Co., bargain with Safeway. They locked out their union workers the next day.
Kroger does not have stores in Maryland. Acme Markets Inc., an Albertson’s subsidiary, has stores in Fallston, Chestertown, Stevensville, Elkton and Havre de Grace. The UFCW has 1.4 million members
nationwide, including about 50,000 locally.
The strike “has profound implications for consumers
that go beyond just having your supermarket picketed
on a Saturday afternoon,” said John Brouder, managing
consultant with Boston Benefit Partners, an employee
benefit consulting firm that works with
employers and
labor unions.
Baltimore area eyed
Locally, striking California workers have picketed
some
Safeway supermarkets in the Washington area to
bring national attention to their cause. Contracts in
the Baltimore-Washington region expire in March, and
union leaders have told members to expect a strike if
the California dispute is not resolved and management
here wants workers to make similar concessions.
The Washington pickets have received a good response
so
far, and there are plans to expand the campaign to
Baltimore soon, said Jill Cashen, a local UFCW
spokeswoman. The union also represents employees at
Giant Food Inc. and Super Fresh here.
“Every contract is different,” said Craig Muckle,
public affairs manager for Safeway’s Eastern region.
“I don’t know what the issues are on the table, and
what they might end up being here. It’s difficult to
speculate on what’s going to occur in March.”
While some stores are being picketed, “customers are
still coming in,” Muckle said.
At Giant, the Landover-based subsidiary of Dutch
grocer Royal Ahold N.V., spokesman Barry Scher said
officials are monitoring developments in California.
“As a matter of
course, we always follow labor contract discussions
involving the food industry, and other industries,
too,” he said. “It provides us with an opportunity to
follow issues and how they are resolved.”
The Teamsters union added
its support to strike last month, stopping work at 10
distribution
centers in Central and Southern California. The pressure on the companies is
stepped up, said Brouder of Boston Benefit Partners.
“The stores have been facing an economic
loss, but they still have food on the shelves,”
he said. “If it gets
to the point where there’s
no food on the shelves, then I think the real question
is: ‘Are they going to settle? Is there ground for
compromise?’
“The next two weeks are going to be telling,” Brouder
speculated. “It’s also going to tell what’s going to
happen
in the Baltimore-Washington area.
“Both sides claim to be hunkering down for a long job
action,” he said. “If the California job actions
are still ongoing, as other affiliates of the
companies have contracts come up they’re probably
going to have to take the same strong stand.
“Both parties will,” Brouder added. “It’s conceivable
you could see
this sort of job action go from coast to coast.”
‘Wal-Mart is the killer’
The steady advance of Wal-Mart, with its cheap prices
and low wage-and-benefit packages, has so far not had
a big effect on the Baltimore region, where shoppers
have a number of alternatives.
But with its move in recent
years into groceries, Wal-Mart has become a direct
competitor to Safeway, Giant and the other chains,
putting pressure on those companies to cut costs and
offer lower prices.
“The same issues that we’re seeing in California we’re
going to see here,” said BCCC’s Barry. “It’s the
Wal-Marting
of America. ? Wal-Mart is the killer.”
Health-insurance costs are at the center of the
California dispute. In the early 1990s, the
supermarket operators changed the way they financed
health benefits ? contributing to a trust fund to
ensure that benefits would be available to workers.
But the change also meant that the trust could be
operated with a smaller cash reserve, and the
supermarket chains withdrew hundreds of millions of
dollars from that reserve fund.
Meanwhile, health-insurance costs have skyrocketed in
recent years, and the supermarket chains have proposed
doing away with the trust fund altogether. This would
make workers responsible for paying for any increased
benefit costs.
“Over the last four years, we’ve
seen the return of very significant health-care
inflation,” Brouder said. Health-care costs generally
have grown
at three to four times the inflation rate, and “lots
of employers have been making people pay more for
insurance,” he said.
Cashen, of the UFCW, sees the issue differently.
“Safeway is pushing an agenda in California and across
the country to eliminate health benefits for workers
at its stores,” she said. “Chief
Executive Officer Steve Burd has publicly proclaimed
this is a priority for them.”
But Cashen pointed to a recently reached
settlement between Kroger and workers in West
Virginia, who also had been striking over health-care
benefits. They are protected in the final agreement,
reached Dec. 9 and approved two days later.
“Hopefully, [the settlement] sends
a message that when an employer is looking to sit down
and negotiate and work out an agreement, you can bring
an end to disruption.”
Wake-up call for unions
BCCC’s Barry says unions should view the California
standoff as a wake-up call to increase their ranks.
“For a long time, Wal-Mart was not a competitor for
the unionized grocery stores,” he said. As a result,
“unions have been kind of slow about getting out to
organize.”
While the Baltimore area has greater union penetration
than much of the country, “that balance has been
tipped,” Barry said.
At Giant Food, its structure includes “tiers”
of employee benefits, with newer workers receiving
lower wages and fewer benefits than those with more
seniority, Barry said.
Ahold, Giant’s parent, could face pressure to cut
costs at the grocery chain as it recoups from a $1.1 billion accounting scandal at its Columbia-based US
Foodservice Inc. subsidiary, Barry said.
Meanwhile, Scher, the Giant spokesman, said the
advance of Wal-Mart and other “big-box” retailers in
the grocery business is having some impact.
“These new, non-union, lower-cost retailers are trying
to take our
customers away ? not with better service or
better-products ? but with lower operating costs and a
constant emphasis on advertised pricing specials,” he
said. “These tactics ultimately hurt us and other
established local food stores by challenging our
ability to grow our business and continually provide
good jobs.”
Cost issues loom
Safeway has declined to estimate the strike’s
potential cost.
Mark Hugh Sam, an equity analyst at
Morningstar Inc. in Chicago, said the company could
lose about $40 million per month. That amount, he
added, is “not a lot for a company like Safeway,” with
$800 million in free cash flow.
The health-care issue, however, is “huge,” he added.
“What exacerbates Safeway’s problems in
California in particular and throughout the
supermarket industry is the competitive pressures
placed by the continued expansion of Wal-Mart.”
Giant expects health-care costs will rise 24 percent
next year,” Scher said. And even as costs rise, Giant,
like other supermarket chains, is under relentless
pressure to cut prices. The retailer’s efforts include
stepped-up promotional activities in recent months to
attract and keep customers, he said.
Mustering support
If local supermarket employees end up on strike,
public
support could be tough to muster. Many people at the
Safeway stores being picketed in the D.C. area seemed
unaware of the California dispute.
But store managers aren’t taking any chances. One
Safeway store in Bowie in Prince George’s County that
recently was picketed had a sign immediately inside
the store saying, “Safeway employees here are not on
strike.”
“I don’t think they’re going to get that much
sympathy here,” said David C. Martin, professor of
human resource management at the Kogod School of
Business at American University in Washington.
Shoppers in the
Baltimore-Washington area can shop at such non-union
chains as Sam’s Club, Food Lion or Costco Wholesale Corp.
Yet Jackie Mills, a union worker from California in
town just before Christmas for the Washington effort,
said local
shoppers’ reaction to the strikers’ presence at the
stores has been “really, really good.
“They’re really
surprised,” she said. “They heard about this in
California and the other states. They didn’t realize
they were going to be affected by it.”
