At Harley-Davidson, the company that makes the iconic motorcycle, union workers in Wisconsin agreed to an unusually long contract of seven years. During that seven-year period, the company has the right to freeze wages. There will also be higher health care expenses for workers. The company will also be allowed to use more casual workers who receive lower wages and probably will not receive health or retirement benefits. Why did workers accept this contract? Harley said that it needed to cut millions of dollars in costs to be profitable in an industry where sales have weakened and the timing of a recovery is unknown. Harley lost $55 million in the past year. One way to cut costs would be to move production to other states with lower labor costs or to move production to lower-cost countries. Harley put on the table the possibility that it would completely close its Wisconsin factories without the worker concessions and resulting labor cost savings. By voting to accept the concessions, workers received a verbal commitment that the factories would stay open, but no written guarantee. Some jobs will still be moved out of Wisconsin despite the concessions. But, some workers saw little alternative. As one put it, “I am too young to retire and too old to start over.”

A similar situation took place at Sub-Zero/Wolf, an appliance manufacturer. The company threatened to move jobs from Wisconsin to a lower-cost plant in Kentucky if workers did not agree to concessions. The unionized workers ended up agreeing to a 20% pay cut, followed by a freeze of wages and benefits for the following four years. As a result, the company will still move some jobs to other locations, but most jobs will now remain in Wisconsin.

Questions

1. Why do companies ask workers for wage and benefit cuts or freezes? Is it the right thing to do?

2. Why do workers agree to these concessions? What negotiating leverage do they have in dealing with the company? What changes have occurred over time that have reduced the negotiating leverage that workers have?

3. What are the future prospects for workers in manufacturing? Does it differ from state to state or country to country? Explain.

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