TUCSON, Ariz. -- Even as it appears poised to enjoy a long-awaited upturn in its business, Caterpillar Inc. is bracing for a possible renewal of the bitter labor strife the company endured in the 1990s.þþAt a daylong presentation last week to Wall Street analysts and fund managers at a company-owned site in the desert outside this Arizona city, one Cat official after another stepped forward to outline how cost-cutting and efficiency measures have helped fatten the Peoria manufacturing giant's profit margins, how a diversification effort has lessened the heavy equipment-maker's vulnerability to the economy's cyclical swings, and how the rapidly growing infrastructure needs of developing nations around the world promise ÿfantasticÿ future growth opportunities.þþIn a closing address, Chairman and Chief Executive Glen Barton sounded the same upbeat themes but then went out of his way to send a carefully worded warning shot across the bow of the United Auto Workers union, whose contract with Cat expires March 31.þþÿWhile we hope to avoid any work stoppage,ÿ Barton said, ÿwe have tangible and realistic plans in place to ensure continued successÿ in the event of a strike.þþBarton's pointed commentary ÿsounds very similar to what Cat said in 1991,ÿ when the company was preparing for a groundbreaking, and ultimately successful, face-off with the union, said Bill Scott, head of negotiations for UAW Local 974 in Peoria. Scott declined to comment further, saying a formal response should come from officials at the UAW national office in Detroit. Officials there couldn't be reached Tuesday.þþThere is further evidence Caterpillar is preparing for a possible fight. The company, which successfully thwarted a previous UAW strike by hiring replacement workers, has launched a court challenge of a recently passed Illinois law that restricts the ability of companies to hire temporary replacement workers during strikes.þþUnder the law, which took effect in July, employers faced with a strike may hire temporary replacement workers but are barred from using a day-labor agency to find such workers.þþWith negotiations set to begin in early December, the auto workers' bargaining position appears weaker than it was a dozen years ago. For one thing, as a result of productivity improvements and Caterpillar's expansion of offshore production, Caterpillar's 67,000-person global workforce includes a much smaller number of UAW-represented workers than in the past: The union represents about 7,800 Cat workers, just about half the number it represented in 1991.þþAnd though a Caterpillar spokeswoman emphasized that ÿhopefully, there won't be any work stoppage,ÿ she confirmed that the company's extensive foreign production capability will allow it to fill U.S. customers' orders with products manufactured by workers in other countries to a much greater extent than it could a decade ago.þþHistory of strifeþþThrough much of the 1990s, relations between the company and the UAW were marred by hostility and repeated conflicts.þþWorkers walked out after their contract expired in late 1991, but grudgingly returned to work several months later--without a new contract--after Caterpillar threatened to resume production using temporary workers. The return, under terms imposed by Caterpillar management, marked a painful retreat for Cat's UAW workers. It would not be the last.þþIn mid-1994, still working without a contract, the workers launched another strike. This time, Caterpillar followed through on its promise to keep the line running. Using a production workforce composed of salaried employees, temporary workers and disaffected UAW members who crossed the picket line, Caterpillar not only continued to turn out product, but also reported record profit for that year.þþAfter a disastrous 17-month holdout, during which UAW members tried to survive on $100 a week in strike pay and Caterpillar continued to churn out machinery, the UAW ended the second walkout in early 1996.þþEven after the workers returned to their jobs, it took more than two years before the union negotiated a contract: In what's widely viewed as a major victory for Caterpillar's management, the union signed a six-year contract granting a number of concessions in pay and work-rule issues. That 1998 contract, which generated widespread unhappiness among the union rank and file, is set to expire at the end of March.þþBarton, 64, wasn't at the helm during the protracted dispute; he moved into the top job in 1999, succeeding Donald Fites.þþBarton's strategy has centered on diversifying Caterpillar and on reaping operating efficiencies through the use of a management-strategy program known as ÿSix Sigma.ÿ His performance has drawn solid marks from Wall Street, even though Caterpillar's marketplace has been depressed for much of his tenure as CEO.þþBest known for its signature yellow earth-moving equipment, Caterpillar is also a leading manufacturer of diesel engines for use in trucks, electricity-generating equipment and other applications. But its heavy-equipment sales have been under pressure around the globe, because weak economic conditions in the U.S. and other major nations have held down Cat's sales and pricing power.þþThe mining industry, a major buyer of Caterpillar's mammoth equipment, has been blighted by low prices for copper and other commodities for several years. More recently, diesel-engine sales have been crimped by a cyclical downturn in the truck industry and by a falloff in once-red-hot demand for electricity-generating gear.þþAwaiting `replacement cycle'þþNow, however, evidence is growing that Caterpillar's prospects are brightening. Through the first six months of this year, Caterpillar's results have shown surprising strength. In less than a year, the price of Cat shares has more than doubled, from a low of $33.75 in October to Tuesday's closing price of $69.40.þþIn the face of sluggish economic conditions, many of Cat's equipment customers have kept their old machines running rather than shell out for something new. But their ability to do so is finite, Cat officials reminded analysts, and evidence is growing that the ÿreplacement cycleÿ is starting to kick in.þþIn emphasizing Caterpillar's growth prospects, officials said the company, which last year had revenue of $20.15 billion, expects to hit $30 billion by the end of the decade.þþIt remains to be seen whether Caterpillar's clean-diesel technology will yield all the economic benefits company officials predict, said H.C. Wainwright & Co. analyst Eli Lustgarten, and only time will tell whether the growth spurt Cat officials are forecasting comes to fruition.þþÿHaving said that,ÿ Lustgarten added, ÿI'd hate to compete against these guys.ÿþþ
Source: Chicago Tribune
