Firm Stance By Grocers Puts Crimp On Progress

Staff Reporter

By now everyone knows why the union and grocery chains remain at loggerheads.

A pending incursion by Wal-Mart Stores Inc. and rising health care costs have driven employers to demand a laundry list of takeaways; likewise, unions nationwide have rallied around the United Food and Commercial Workers to draw a collective line in the sand on health benefit cuts.

While outside forces are important factors that have helped extend the strike into a seventh week, a change in the way the supermarket chains approached the contract talks may be playing an even more significant role.

It is, according to several sources with knowledge of both sides' positions, tying the hands of negotiators in reaching a compromise.

"This thing is being engineered from the very top," said Bill Bailey, former president of the Food Employers Council of Southern California Inc., which served as the chains' bargaining arm for the last contract signed in 1999. "Everybody in between is irrelevant. They are just shuffling messages from the table to the top.

Unfortunately, the message that is coming down is, 'No change, no change, no change.'"

Setting the tone

Union officials said they noticed a difference in the weeks leading up to the start of negotiations in September.

On previous contracts, union negotiators would work with employers to devise ways to cut labor costs without giving up benefits. This time, they faced major demands wrapped in a take-it-or-leave-it ultimatum.

"Every time we've come into negotiations, we were able to find solutions," said Rick Icaza, president of the UFCW's L.A.-based Local 770. "This time, they are not interested in solutions."

Industry consolidation is one reason for the shift. The number of chains involved in the Southern California contract has dwindled to four from 12 in 1980. Back then, they were all regionally owned; now only two are, Colton-based Stater Bros. Holdings Inc. and Compton-based Arden Group Inc., parent of Gelson's.

This time around, instead of leaving negotiations to the Food Employers Council, the big chains Safeway Inc.'s Vons and Pavilions, Albertsons Inc. and Kroger Co. unit Ralphs decided to conduct negotiations themselves, as a single bargaining unit. Stater and Arden signed "me-too" agreements with the union, under which they will abide by the resulting contract.

In the past, Bailey said he would typically gather the principals of the major chains six months before talks were to begin and establish bargaining parameters. For one three-year pact, for example, the goal was to keep labor costs at or below a 3 percent increase each year.

This gave the union a chance to know what it was up against, and come up with alternatives.

"The principals gave me the tickets the right to make the handshake if I could get a deal within the parameters they set," Bailey said. (He is now chief administrative officer for Los Angeles-based Yucaipa Cos., the Ronald Burkle investment vehicle that once held a large stake in Kroger.)

By all accounts, demands set by the chains this time around are stringent a two-tier pay scale, workplace rule changes and significant benefit cutbacks with little flexibility.

Even the intervention of a federal mediator, Peter Hurtgen, hasn't been able to get things on track. After Teamsters drivers joined in the job action by halting deliveries to stores last week, the most recent mediation talks recessed. There is no timetable set for resumption, John Arnold, spokesman for the Federal Mediation & Conciliation Service, said last week.

"The inefficiency is that management tried to educate the union at the bargaining table," said Bailey. "You can't do that because the union is conditioned not to listen to you. They should have been educating the unions in between contracts, taking pieces of these problems and start fixing what's wrong."

Old hands, tied

The grocers' negotiating teams are led by the chains' respective directors of labor relations Jim Mahan at Vons, Brent Bohn at Albertsons and John Schroeder at Ralphs.

During the last round of negotiations four years ago, only Bohn was present as a member of the management bargaining team, although the union does not view its counterparts at the table as an obstacle to a deal.

Mahan, after all, has been an official with the Oil, Chemical & Atomic Workers International Union and a federal mediator, according to the union. And by invitation of the grocery workers' union, Schroeder took part in a seminar designed to develop strategies to combat Wal-Mart's growing market share.

Icaza said Schroeder offered insight into the non-union discount retailer's labor tactics most notably, Wal-Mart pays decent wages when a store opens up and then makes cuts after local competitors have been weakened or eliminated. "We had common goals," said Icaza. "We would not have invited (Schroeder) if we thought he was anti-union."

But the negotiators' backgrounds are a moot point, Icaza said, because they have strict marching orders from their bosses.

Safeway Chief Executive Steven Burd mapped out the strategy more than a year ago, union officials said. Burd's pitch to the other chains was simple: if they wanted to be in business five years from now, they had better implement massive labor cost-cutting programs similar to Wal-Mart and other discount retailers, Icaza said.

"In the marketplace they hate each other. They'd do anything to steal customers from each other," Icaza said. "All of a sudden, negotiations come in and they are like brothers. By taking this stand, he has united the three of them."

Officials at the companies refused to discuss their business strategies.

But they rebuffed claims that company negotiators are taking a more hostile stance. They say it is the industry's changing dynamics that have become hostile to employers, who have seen their health care costs balloon by 50 percent since the last contract was signed.

"Every negotiation is unique with its own special set of issues and circumstances," said Terry O'Neil, spokesman for Ralphs. "Over the last four years, health care costs skyrocketed out of control. It became a major issue."

Hashing it out

Yet even health care could have been at least partially resolved had there been more dialogue in recent years, said Bailey, noting that trustees on both sides overseeing the health and pension funds meet monthly.

He said cost-saving strategies could be applied to pharmacy benefits, for example, if the union would agree to shoulder some co-payments. Mail-order drug benefits are another area of possible savings, as are better deals with multi-year contracts with HMO providers.

Icaza said that if the grocery chief executives would show up at the table themselves, both sides could work together to find savings as they have in the past. For instance, the union four years ago changed its health plan to one that charged less for chiropractic care. It also agreed to a less expensive overall plan that gave employees with less than two years experience only 75 percent of the benefits available to more experienced workers.

"They've got their feet in cement," said Icaza, of the company negotiating teams. "They have no latitude to negotiate a reasonable contract."

Meanwhile, as each side waits for the other to cave in, the unionized picketers and their employers face the prospect of very meager holiday budgets.

"This is a very stressful time for me," said Icaza. "But I'm energized because I know we're right."

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