Between A Rock & A Hard Place

As some of you may know, I am employed by a grocery chain. Recently,(3 days ago) the chain of about 35 stores in Denver announced that they were closing 9 of these stores. The problem--the challenge that the labor union and the corporation have to work out---is finding replacement jobs within the company for over 400 people. Unions operate on the principle of seniority---thus layoffs are usually towards less senior employees---but as we have discussed here before---a company also wants to keep its most valuable employees rather than just its oldest ones.The company was recently bought out by a Capital management firm whose sole duty is to make the most profit out of its investments.Oil & Water do not mix very well.In this topic I wish to discuss corporate philosophies and strategies---union rules and the value of such rules--and answer me what you personally would do were you a store manager (or higher) faced with such decisions. Is it all about bottom line? Are employees these days simply a number on a page, managed the way money is managed?On a sidenote--our union contract expires September 1st and these stores will all be fully closed by mid June.The bargaining unit has 66% newer workers hired after 2005 and 34% with many years of service.One challenge for the union is to come up with a fair contract that helps all of its workers.The only challenge for the corporation is of course to make a profit.

Maximize profits, minimize costs. Maximize profits, minimize costs. Maximize profits, minimize costs. Yes. Yes.

Businesses are there to make profits. But making profits these days does not mean shitting on employees and not giving a flying fuck for the communities they operate in. By-and-large, if a local shop wants to maximise its profit over time, it will look after its staff and build a trusted reputation with its customers.If you're asking who I'd fire - it would be my worst performing staff; those with poor attendence records, bad personal skills most complaints against them, lowest sales and so on. Age would not be a factor, though pay-rate might be.

Rules based on seniority are stupid where productivity is important.
Seniority should only be considered after performance... if performance is equal, then seniority should come into play.
Otherwise you get left with a workforce that is not optimal for working. Which means less productivity, which means less business... which means the union will put itself out of a job.As a store manager, I would let people go based on performance. Yes.
The bottom line for the company owners as well as the bottom line for the employees.
What else is a business or a job for? No.
The business needs to understand that happy workers = good workers = higher productivity.
The workers (union) needs to understand that lower productivity = lower business = less jobs.Both sides should be working on productivity as it benefits everyone involved.
Businesses need to remember that people are people, not robots. And happy people = better workers.
Too often unions get involved in the business of keeping union workers happy = more money for less work = lowered productivity = eventual collapse of the business = no more union. This is the wrong idea.
The union needs to come up with a fair contract that helps the business. No business = no union = no workers at all.
"Helping the workers" is what comes from helping the business. When you help the workers first... you end up getting short term positives in exchange for long term negatives (no more jobs). It's a business.
This should be the only challenge for both the corporation and the union.If the business or the union has any other higher priority... the business will eventually fail and there will be no jobs for anyone.

I can agree with a lot of that, in the context of a business which has long-term growth, profitability and success in its sights.However, Phat's company appears to have been bought by venture capitalists, for whom the business will be no more than a commodity, to be bought cheap, streamlined, and sold at a quick and hefty profit.I agree that a union needs to address the long-term future and productivity/profitability of the business, within its demands. But they'll be pissing in the wind, if the owners just want to tart up the business for a short term sale and gain.

On September 2nd the contract with the union expires.A big question that remains is whether or not the new company has any legal obligation to fulfill any of the provisions that were in the old contract such as funding retirement for those who retired in the past as well as those who might retire in the future.

All corporations are fixated on maximizing profits for shareholders and investors. However, I would add that private equity firms like Capital management are the most egregious example of that philosophy. At least corporations, like Apple & Microsoft, have an R&D component and a desire to expand their intellectual property. Private equity firms focus solely on the bottom line and generally run a company on an absolutely skeleton crew until such time as they can:a) Find a buyer for said company
b) Re-IPO the company into the broader marketGood ol' Mitt Romney's company (Bain Capital) is a similar example of a firm that operates in that manner.

Agreed.It's also possible that the sale-and-gain will be to another company in the same industry, who will therefore require the same employees.
In that case, what I said should still be valid.I don't know much about such things... but my gut feeling is that it would be easier to sell something to the same industry because shifting to another industry would include additional costs of changing infrastructure.But, yeah, if the company is going to be dissolved one way or another, then I don't see why the employees shouldn't go for whatever isn't nailed down That seems like a big gamble, though.

A little older reading, but definitely related to this topic. America: What Went Wrong?The authors examine, among other things, the practice of buying good businesses, gutting them, and selling them at profitsafter which point they soon fail, or profiting off their bankruptcy.Either way, Phat's situation doesn't look good.Edited by Jon, : You think I'd know what a ?-mark is for...

The firm, Cerberus Capital Managementhas agreed to honor the union contract until it expires in early September. There has not as of yet been any talk about what will and will not happen after that point. The union is telling its members that now is a good time to negotiate with the grocers in Denver,as the other major union grocer also has its contract expire in early September and has announced that they need to hire 1100 employees to catch up to speed. I can't see how the union would be so blind as to not sense the reality of this situation---they should know their opponent and factor this in to any negotiating strategy. One thing that the union is good at is public opinion and use of the press. We want to raise the wage for the newer workers,keep quality health care for the workers, and of course help the new corporation to succeed.

quote:

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Albertsons, LLC is an American grocery company founded and based in Boise, Idaho. In January 2015, it acquired Safeway Inc. for $9.2 billion.[4] The newly merged company has more than 2,400 stores and over 250,000 employees,[1] which makes it the second largest supermarket chain in North America after Kroger, which has 2,424 stores.

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The pension may prove to be quite a fight,but if we are unified it will be part of our proposal. The capital management firm may simply sell the assets and/or rename or reopen as a non union shop. I am unsure what public opinion or support would be should such a scenario ensue. If the new company wishes to sell groceries, they will benefit by agreeing to a new contract. If, however they simply wish to make money, they may sell the assets. Time will tell.Edited by Phat, : No reason given.Edited by Phat, : No reason given.

Lots of places sell groceries successfully without union contracts.Edited by Jon, : No reason given.Edited by Jon, : No reason given.

Exactly my experience when a progressive family owned company was bought up by a corporation: the cut the entire R&D (including me) and skinnied on material use and quality and two years later went bankrupt which then had parts sold to competitors.

It's not quite as simple as that (as evidenced by the fact that there are disputes between corporation and workers).The essential difference is disagreement in how the profits are shared:Corporate philosophies and strategies are to maximize distribution of profits to the owners and shareholder,Union philosophies and strategies are to obtain a just distribution of profits to the workers.Corporate philosophies and strategies are to minimize costs of production and lawsuits (from production accidents in the workplace and from product failure lawsuits in the marketplace).Union philosophies and strategies are to protect the workers from injury and death (to decrease accident lawsuits) and improve work conditions (health and safety, having proper tools, etc and incidentally decreasing product failure lawsuits by taking pride in their work making quality products).Many of the areas overlap but the difference in philosophies results in different balances being sought. The 40 hour work week, overtime pay, vacations, health benefits, no child labor, etc are ALL from unions.Enjoy

The company wants its profits maximized.The union wants its profits maximized (employee pay, union dues, etc.).Their interests are in direct conflict.And it's even worse when the 'company' is the kind that buys other businesses, guts them, and tries to sell them or profit off the bankruptcy.

Fully vested obligations based on old promises do not disappear. These can be represented as a present debt that is on the books of the company. Either the new owners or the old owners will be responsible for that. I assume that the old owners will have some assets after selling the company, but generally the new owners get the debts and the assets.Doesn't mean that the retirees might not have a legal fight to get their money. I've seen some pretty innovative schemes to try to acquire companies without also acquiring some of their financial obligations. During the home mortgage financial melt down, some of the big banks tried to do exactly that; acquiring banks on the cheap and attempting to avoid obligations to eat the bad loans of the defunct bank. Edited by NoNukes, : No reason given.Edited by NoNukes, : No reason given.