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Posts Tagged ‘Unions’

Humpty Dumpty Prevention Program

Most chief executives are entering 2011 with big decisions to make—especially how to revive sales.

But, some have deeper problems to address.  Facing down “significant cost, efficiency and production flexibility gaps” as well as fierce competition for some, such as Harley-Davidson who last November told Kansas City union officials that it might move operations to Harley’s Springettsbury Township plant if a contract wasn’t ratified by early March.

Well it’s March and their “no blink” management style resulted in the members of the International Association of Machinists and Aerospace Workers Local 176 and United Steelworkers Local 760 not letting “Humpty Dumpty” fall.  They ratified a contract by a vote of 467 to 185 and the new labor agreement takes effect in August.

The “fall prevention program” has been implemented and proven to be an effective tool in the loss of all jobs in Kansas City.  Congrats to Local 176 and Local 760.  The new contract is a 7-year deal that, when implemented, will result in the Kansas City plant having about 540 full-time, hourly unionized employees compared with about 685 today.  Yes, it’s a loss, but it does keep many high-paying manufacturing jobs in Kansas City and brings all H-D plants under one umbrella for production flexibility.  The company stated that the new contract, which will be implemented in phases, will result in about $15M in annual savings starting in 2013.

To all the folks who railed on my public union previous blog post, you see private unions have to adjust to economic conditions.  Unlike the Wisconsin public union members who have protested for days because they have been ask to pare back their benefits, Harley-Davidson has budgetary constraints that can’t be fixed by raising taxes. If we used the public union mentality I suspect they would ask Harley-Davidson to respond by raising prices and demand that motorcycle enthusiasts just pay more for a scooter instead of buying something else?

And if all that wasn’t enough… this item falls into the “what were they were thinking” category… I read that in Minnesota a local pipefitters union has purchased the Hillcrest Golf Club in St. Paul, paying $4.3M – yes, you read that correct at $4.3M – for the private club and vowing to keep it private for at least two years.  That does a lot for the unions  being frugal perception…

Photo courtesy of NYTimes.

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He’s a preacher’s son, a perpetual optimist, and in a nod to the “Imported from Wisconsin” team he rides a Harley-Davidson Road King.

I’m talking about Wisconsin Gov. Scott Walker who pledged a “return to frugality in government.”

Harley motorcycles and government frugality are two things I can rally behind, but just 6-weeks into his term, the badger state protesters, mostly public-sector workers have seized the same building and are comparing the governor to Hitler and Darth Vader.

The trigger?  A bill which would reduce most public-sector workers of their union rights and pare back their benefits. The protesters interpreted “frugality” as code for “union busting” and erupted into dueling rallies and slogan chants.

In my overly basic description, unions have two sides.  One is the great positive influence on democracy of people banding together for equal and fair treatment by employers.  The other is the misuse of that power to force too many concessions from employers, or become unreasonable about the union making concessions when economic conditions have changed.  In fact, watching the teachers demonstrate in Wisconsin I wonder how all these people obtained college degrees because a 6th grader understands that if you have $50 in the bank, you can’t withdraw $500.  Can they spell bankruptcydeficit, or foreclosure?  And if your taxes are increased (suggested by legislatures who like gov. welfare programs and want someone else to pay for them), will you have more money or less to spend?

“Frugal” may describe Gov. Walker, but for many Americans we’re in ‘frugal fatigue’ fearing a job loss any day, coping with rising health care costs and hoping for any opportunity to break the economic gridlock and return to the good ‘ol days of 2005.

Take Harley-Davidson who was on a high-speed-train to utter collapse.  They had to reduce labor costs and gain worker flexibility to remain competitive in the new economy.  They stated it would move operations from Milwaukee to Kansas City if it did not get a new union contract with lots of worker concessions. They also had threatened to move operations from York to Shelbyville, Ky., if it could not get a contract in York.  The company never blinked and I don’t think it was an empty threat of playing one location against another, and the reality was they have the capability of moving if they want too — anytime.  The company wasn’t expecting much and didn’t get any pushback from the unions given the dismal job market and in the past 22 months, Harley-Davidson has negotiated competitive labor contracts with the unions, exited non-core brands, expanded internationally, rebuilt its balance sheet, and addressed the scarcity value of the brand.

Will there be fewer people employed at $35.00 an hour to manufacture a H-D motorcycle?  Yes,  but this wasn’t some proud attempt at “union busting” by the company management.  It was about survival of the company and for the remaining few people employed it was about work or do without!

So, for all the Wisconsin fans and Wisconsonites in these troubling times – for the love of the Super Bowl champions, Bucky the badger and of course, the beer (Pabst, Schiltz, Miller and Blatz) – can we all just agree and get united to pitch in a bit more on health care and retirement benefits like the rest of us in the non-public, non-union job sectors and break the gridlock?!

Photo courtesy of WI., collective bargaining rights protestors.

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Productivity.

It’s the manufacturing mantra of the corporate world.  It’s about making X number of  “widgets” an hour and reducing unplanned absences to maintain plant productivity.

Harley-Davidson’s CEO and President, Keith Wandell, told analyst during the Q4 2009 revenue results that the company intends to enhance profitability through continuous improvement in manufacturing, product development and business operations.

I would submit that H-D doesn’t have a productivity problem.  They have an absenteeism problem!  If a worker calls in sick that is considered an unplanned absent which brings down manufacturing productivity.  In fact, a company document indicates the motor company incurred some 382,000 hours of missed work time during 2009 which was worth about $13 million.  The document doesn’t state whether that number refers to the company as a whole or some other subset of operations, but we do know that one of the major considerations cited for moving the York Vehicle Operations from PA. to another state was the excessive absenteeism at the Springettsbury Township plant.

As a result of the concessions to keep the plant in York, changes in work culture and a new attendance policy was negotiated as part of the multi-year restructuring process.  A point system was created and the new policy gives an employee points or partial points for failure to appropriately report an absence in addition to the actual absence.  Now there are reports the Union (IAM) is whining about unilateral policy changes and trying to move the debate from absenteeism to policy.

Many would debate that unions cripple companies.  The debate often centers around how they are anti-technology, anti-productivity and pro-wage growth.  It’s like they live in a virtual reality world where price points, product-market pressures, and capital returns don’t matter.  The net-net is that unions are adept at demanding the highest dollar for the least amount of time worked.  And as worker costs escalate firms cut back on technology, plant investments and business process improvements.  Sound familiar?

Still don’t believe me that H-D has an absenteeism issue?  Well let’s look at the numbers.

H-D has about 9000 employees worldwide.  Taking H-D supplied numbers of 382,000 hours and divide it by the total number of employees (9000) equals 42.44 hours of unplanned absence per employee.  That’s more than one work week of absenteeism for each and every employee!  This in addition to the 15 work days of annual leave (vacation + holidays) employees typically receive in U.S. based companies.  Wow, talk about “iron-clad” benefits!  Yet, it’s actually worse because to correctly analyze the absenteeism number you need to take into account standard manufacturing practices which are based on the number of Full Time Equivalents (FTE) and available work hours a year (1928 hours) per FTE.  Calculating absence using this method means there were 198 employees (FTE) absent all year during 2009.

I don’t know if this situation is an accurate reflection of the mental state of the H-D work force or if it’s an edge case due to issues like H1N1?  However, an absenteeism rate which effects ~20% of your work force is a systemic issue and without a doubt one of the most significant factors to affect quality in an assembly line along with negatively effecting employee morale.  Let’s hope they get a handle on this issue.

Photo courtesy of Scribd.

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