Union Avoidance

2009 8 December 2008

The Economic Impact of Unions

• The economic cost of unions (determined by combining lost income & output over the period 1947 to 2000) exceeds $50 trillion

• Unionization lowers incomes over all • A state with a 10 percent unionized work force can expect a 0.7

percent increase in its unemployment rate• For each four additional workers who become unionized, one less person works. • In 1990s, the decline in union density in the private sector has

been sharp, adding to the vitality of the economy. As a result, there has been renewed economic growth & a rising proportion of the working age population that actually works

Source: Richard K. Vedder and Lowell E. Gallaway, "Do Unions Help the Economy? The Economic Effects of Labor Unions Revisited," Government Union Review, Volume 20, Number 4, December 2002, Public Service Research Foundation.

What Will a Union Cost MCFA

Research indicates that the cost of running a unionized operation is 25%

to 35% greater than for a non-unionized one $3.6M …

• Larger HR staff to deal with contract negotiations, grievances & arbitrations (2-3 additional HR staff)

• Increased involvement with regulatory agencies; Wage/Hour, OSHA & EEOC

• Frequent need for a labor attorney to deal with contract negotiations, grievances & arbitrations, review compliance with a collective bargaining agreement, etc. ($150k)

• Payment for employees who are called in to cover for stewards attending to union business

• Built-in ineffiencies due to onerous work rules & practices• Intangible Cost is Huge

Lower Productivity• Union-imposed rules limit rewarding an employee

based on performance or productivity • Union grievance procedures tend to protect low-

performing & negative employees• Decreased customer & vendor satisfaction occurs

because of union affects on service, product cost & quality

• Interruption in service & production if a work stoppage or strike occurs

• Union avoidance initiatives & counter union campaigns benefit employees & management & they are cost-effective if an organization wishes to retain its competitive edge

• Rigid operating guidelines limit efficiency

Lower Productivity - Cont’d

• Union strategies & rules impair the employee-employer relationship

• Interference with direct employee-supervisor communication

• Unions cast the employer as the "enemy“ & results in employee mistrust

• Diminished employee participation in workplace decision making

• Employees having to cope with union intimidation

• Less flexibility both internally & externally to move quickly or creatively

Union Corruption• 325 criminal cases, 114 indictments

& 97 convictions of union leadership in 2006 (record high)

- Embezzlement - Extortion - Acts of violence - False reporting - Destruction of records

• $23M in restitution paid to members

New Legislation

• Employee Free Choice Act• The Respect Act• Patriot Act• Lilly Ledbetter Fair Pay Act• Working Families Flexibility Act• Fair Pay Act

Employee Free Choice Act

• Eliminates secret ballot elections• Card check system accepted as valid• 50%+1 cards signed validates union• $20k fine for each employee rights

violation• Ban permanent strike replacement

workers• Mandatory arbitration after 90 days

EFCA Impact• Potential to be organized increases dramatically• Potential for MCFA jobs moving off-shore• Minimal leverage in contract negotiations• Higher labor costs (20%-40%)….facts• Collective bargaining• Frequent grievances & arbitrations• Work stoppages….strikes• Restrictive work practices• Less competitive globally• Dealing with corrupt organizations• Unions are destroying auto, shipyards & airline

industries ….cities and state governments

The Respect Act

• Removes front line supervisors from the NLRA’s supervisory exclusion

• Forces front line supervisors into unions & collective bargaining agreements with the employees they supervise

• Supervisors have been defined as management since 1947

Respect Act Impact

1st line supervisors in the bargaining unit…

- Best defense against union organizing - Conflict of interest with company - Major source of grievances - Sets precedent for other exempt employees joining the bargaining unit

The Patriot Act

1% reduction in taxable income if….MCFA’s benefit

• Maintain corporate HQ in the US• Pays at least 60% of health care premiums• Policy of neutrality in organizing drives• Maintains or increases # of employees in US vs.

offshore• Full differential on salary & benefits for National

Guard units called to active duty• Provides a “certain level” of compensation &

benefits for retirees

Patriot Act Impact

• Must allow the union to organize• 20%-40% increase in labor cost• Significant increase in retiree pay

& benefits• Inability to move operations

offshore• Inefficient work rules & practices

Lilly Ledbetter Fair Pay Act

Amends the charge filing periods….

• Title VII of the Civil Rights Act of 1964

• The Americans with Disabilities Act

• The Rehabilitation Act• Age Discrimination in

Employment Act

LLFPA ProvisionsAn unlawful employment practice occurs

when….

• A discriminatory compensation decision or practice is adopted

• An individual becomes subject to the decision or practice

• An individual is affected by application of the decision or practice

LLFPA Impact• Current: Settlements limited

to 180 to 300 days from the date of the violation

• Proposed: Unlimited liability including retirement years

Working Families Flexibility Act

Requires employers to negotiate employee requests which relate to…..

• Hours the employee is required to work

• The times the employee is required to work

• Where the employee is required to work

Provisions of WFFA• Employer must meet with any employee within

14 days of a request to change work hours, work schedule or work location

• A written response must follow the meeting within 14 days

• A “No” response must include…. - The cost of the change - The financial resources involved - The physical relationship of the facilities - Impact on customers - Other factors as determined by the

regulator

WFFA Remedies Failure to approve an employees request

couldtrigger a federal investigation by the DOL…

• Hearing before an Administrative law judge

• Civil Action filed in Federal Court• Remedies include…. - Fines - Mandated change in conditions of employment

WFFA Impact• Potential to negotiate terms &

conditions of employment with every employee

• The Department of Labor will control terms & conditions of employment for your employees

• Financial consequences for violations could be significant

• Administration costs will be high• Each employee is a union of one!!!

Fair Pay Act of 2007

• Current provision: Comparable worth pay system regardless of “gender”

• Proposed legislation: Adds “race and national origin” for comparable pay

What Else?Scores of other bills stalled in

Congress….

• Criminal & prison terms for OSHA violations that result in serious injury

• FMLA expanded & paid benefits• Repeal of state right to work laws• Comprehensive immigration reform• Expanded access to health insurance,

retirement benefits & vocational retraining

Sound Unbelievable?• Organized labor invested $450M in the

Obama campaign• AFL-CIO $14M earmarked to get the

legislation passed • Obama & Biden are the co-sponsors of

each of these bills• Obama has promised to pass the bills in

his 1st 100 days in office• Dominate Democratic majority in the

Senate & House

We are at High Risk• Reduction in force scheduled early January• Lack of pro-active union avoidance strategy • Low employee satisfaction survey results - Leadership deficiencies - Lack of trust in leadership• Employee demographics• 1st line supervisors • Excessive span of control• Poor language skills among hourly staff• Recent organizing drive• Weak recruiting & hiring process• Pressure of Velocity & other productivity initiatives

(SOP’s)• Deteriorating market conditions

Next Step

We must make two critical decisions…..

• We must assume that the legislation will pass in some form by April 20th

• We must act with a sense of urgency to protect the Company

Action PlanIt’s imperative that we educate all employees regarding MCFA’s position on labor unions & equip our leaders to earn union free status.

This is a battle for the hearts & minds of our employees that

we must win. It’s all about trust.

- What do we need to accomplish by year end - What do we need to accomplish by Q-1 end - What do we need to accomplish for 2009

Campaign Theme• MCFA competes globally with some of the best

companies in the world• We have assembly plants in Tokyo, Amsterdam

& Houston • We have an assembly plant under construction

in China• Our policy is to assemble trucks where it is

most cost effective• We must cost effectively serve our customers

at a very high level in Houston to maintain our viability in the company

• Let’s all pull together as one strong, dynamic team to ensure that Houston grows & prospers for years to come

Current Business Climate

• Economy in recession, possibly headed toward depression

• Hyper competitive business• Toyota, third world competition• Volatile raw material costs• Customer concerns of doing

business with a unionized company

MCFA’s Position on Unions

• We believe that our people are our most important asset and essential to our success as a business

• It is our strong desire to have a close and direct working relationship with all of our employees

• We are committed to providing the most positive working environment possible

• We strongly believe that third party intervention is unnecessary and inconsistent with how we intend to work together with our people

• Therefore we will do everything within the letter & spirit of the law to prevent our company from becoming unionized

1st Line Supervisors• Critical to maintaining union free

status• Are the company to hourly workers• Must be equipped to play a key role in

the campaign• We must ensure that they represent the

company• Top grading is essential to success• We must accelerate the development of

leadership skills

December Action Plan

• Educate & secure active support from Executive Committee

• Develop & implement “Soft Campaign Plan” with manufacturing leadership

• Roll-out “Soft Campaign Plan” to MCFA leadership Team

1st Quarter Action Plan• Complete reduction in force

• 1st line supervisors conduct one-on-one meetings with direct reports to communicate the company’s union position

• Meet with small groups of office employees to communicate the company’s union position

• Roll-out Employee Satisfaction Survey Action Plan• Begin mandatory leadership training for all

supervisors & managers• Conduct 360’s for 1st line supervisors• Schedule one-on-one coaching to close gaps• Begin weekly “union facts” meetings between

supervisors• & individual direct reports

2009 Action Plan• Complete mandatory leadership training for

all managers & supervisors• Conduct 360’s for all managers & supervisors • Develop action plan to address leadership

gaps• Develop 2009 mentoring plan• Continue “union facts” meetings with hourly

employees• Continue EC “Walking Around” schedule• Add “union facts” to All Employee Meetings• Fill plant HR position