Structural Change in CB: The U.S. Tire Industry

CHARLES JESZECK*

Structural Change in CB: The U.S. Tire Industry

THE EIGHTIES ARE PRESENTING new challenges to U.S. private sector collective bargaining. In industry after industry, firms appear to be resisting union wage demands more effectively. In 1984, a year of strong economic growth, the BLS reported that first-year negotiated wage increases averaged 2.4 per cent, below both the rate of inflation and nonunion wage increases. Companies also have been successful in negotiating concessions in areas such as workrules, medical benefits, and new-hire wage rates. Long- term industry bargaining structures, especially in sectors which had maintained industry-wide master agreements, were disrupted.

Observers have debated whether these developments result primarily from cyclical or from structural factors (e.g., see Mitchell, 1982; Flanagan, 1984). Some argue that the fundamental forces governing collective bargaining in U.S. manufacturing have not changed; instead, the wage settlements of the early eighties actually represent a return to a more normal union-nonunion wage differential, one which had grown too large during the late seventies (Freeman and Medoff, 1984).' The severe recession in 1981-1982, rather than heralding long-term structural change, was the principal factor reducing this differential. Unemployment levels, while currently lower than their 1982 peaks, are still high, inhibiting unions from recouping their losses during recent negotiations. However, the argument continues, as economic conditions steadily improve, unions, too, will bounce back (Dunlop, 1982).

Other observers advance less optimistic interpretations. They argue that technological change, heightened international competition, accelerated capital mobility, and other factors have generated structural changes that largely

"Staff Economist, U . S. General Accounting Office, Washington. D.C. 'Freeman and Medoff cite a study by George Johnson (1981) which finds a 30 per cent unioti-nonunioi~

wage differential during the late seventies, significantly higher than the 19 per cent differential posited between 1965.1975.

h l X T S T H I A l . RELATIONS, \'(>I. 25, No. 3 (Fall 1986). 01986 by the Rcgents of the L'iiivcrsit! (I!' C;alifiirnia. 00 19/8676/86/ 1015/229/$10.00

229

230 I CHARLES JESZECK

preclude private sector bargaining relations from reverting to past practice.’ From this perspective, important changes within the U.S. economy have and will continue to push collective bargaining towards a inore localized, plant- level structure and away from the company-wide pattern bargaining which typified U. S. manufacturing bargaining relations during much of the postwar era.

This paper identifies the long-term market and production developments in one manufacturing sector, the U.S. tire industry. A review of recent tire industry bargaining at both national and local levels indicates that these developments generally have enhanced managerial bargaining power and have increased the significance and frequency of local plant-level bargaining agreements involving nonwage issues. Such structural changes have destabilized pattern bargaining arrangements, pushing the industry towards a more frac- tionated company-wide, and in some cases, plant-level bargaining structure. I conclude that the recent developments in tire industry bargaining mirror conditions in other organized manufacturing sectors and that, even as economic conditions improve, these factors will inhibit organized workers’ ability to regain the bargaining initiative during the foreseeable future.

Structural Change in the Tire Industry, 1945-1985 The U.S. tire industry is and has been dominated by a few

multinational finns. Throughout the early postwar period, American tiremakers maintained stable customer relations with major auto companies, although cyclical fluctuations in auto sales led to wide swings in annual passenger tire production. Tire coinpanies also inaintained relatively stable shares of the domestic replacement tire market and foreign competition was nonexistent. By the sixties, structural change was underway in the industry in the form of new locational, market, and technological developments.

Dispersion ofproduction. During the thirties, 75 per cent of the total U.S. tire production was concentrated in the Midwest, with over half of the national total in Akron, Ohio alone (Jeszeck, 1982). While some interregional dispersion of production occurred during the late thirties and early forties, as of 1947, 64 per cent of national tire production was still based in the Midwest (Roberts, 1944; Gaffey, 1940; Frank, 1952; Rubber Age, 1947). Dispersion accelerated during the sixties. Between 1959 and 1966, eight new plants were built in

’Audrey Friedman (1982; 1985a,b) is perhaps the best-known recent spokesperson for this position. Others who have looked at the impact of soiiie of these factors on collective bargaining include Craypo (1975); Navdrro (1983); and Northrup (1983). This position would also seem to follow from the work of Bluestone and Harrison, (1982).

The U . S . Tire lndtistry I 231

the South, two in the West, and four in the Rlidwest. New construction continued into the seventies, with 17 plants constructed between 1967 and 1979, 16 of which were placed in tlie South.

This last burst of expansion overlapped a wave of plant closures in older, more heavily unionized facilities. Between 1975 and 1984, 27 plants were shut (12 in the Midwest, five in the West, six in the South, and four in the East). Although Ohio remained the leading tire producing state until as recently as 1976, today the American tire industry is liased in the South. Twenty-seven of 44 plants and 73 per cent of national capacity are now located in the “old confederacy,” Kentucky, and Oklalionia.

Causes of dispersion . The reasons for plant dispersion have changed over time. Movement in the thirties appears to have been a direct response to union organization, while defense needs influenced tlie location of production during World War I1 (Roberts, 1944). Dispersion slackened during the fifties, probably because of overall sluggish tire sales growth combined with wide annual fluctuations in tire demand. The strong and steady growth in demand during the sixties encouraged tire firins to increase capacity. On tlie other hand, the increase in industrial capacity that characterized the sixties and seventies and the later wave of plant closures during the seventies and eighties were the outcomes of developments in the marketplace and in tire technology which transformed the industry during this period.

Inaport penetration and foreign production i n the U S . Long the world’s largest tire market, the U.S. accounted for 44 per cent of total world tire sales in 1984. For years, severe price competition, high transportation costs, and the necessity of maintaining extensive dealer networks precluded foreign c~nipetition. Despite these barriers, imports began to penetrate key U . S. tire markets during the late sixties. Iniports grew from 1 per cent of the U. S. passenger tire market in 1967 to 16 per cent liy 1984 (see Modern Tire Dealer Annual Facts Directory 1985 and Jeszeck, 1982).

By the mid-seventies, some foreign firins had captured a share of the U. S. tire market sufficient to warrant the construction of facilities in the U. S. The French tireniaker Michelin has most aggressively pursued this strategy, building four tire plants in the South. l h r i n g tlie late seventies, while U.S. firms were closing plants and reducing capacity, foreign tire companies continued to expand their American production facilities. With the recent cutbacks b y

’.kveragr annrial growth in passenger tire sliilmiciits averaged only 2.4 per cent diiriiig the f i f h (a compared to a 4.8 per cent growth rate in the sixties). with a i l i r t l a l flllctri;rtions olten i l l the tloiil)le-digit range (see Knox, 1962).

232 / CHARLES JESZECK

B. F. Goodrich and other U.S. firms, Micheliii is now one of the five largest domestic tire manufacturers. Bridgestone, a leading Japanese tire finn, produces truck tires in Tennessee; Dunlop, a former British firm now owned by the Japanese firm Sumitomo, owns two older U. S. plants and is looking to expand. Many of these foreign-owned tire plants are nonunion and allow management greater production flexibility, providing a production advantage over more unionized firms.

The second transforming event was the introduction of radial tires. First marketed in 1946 in Europe and then in Japan, demand for the belted radial tire grew so that, by the mid-sixties, it dominated those markets. The radial was superior to the conventional bias ply tire in that it provided 2 1/2 to 5 times longer service life, better skid and traction performance, improved puncture resistance, and lower fuel consumption. Today, radials are the principal tires marketed in the U.S., dominating almost all segments of every tire market. In the section that follows, the far-reaching structural impact of this change in technology is examined.

The Introduction of Radial Tires More than any other factor, radial tire manufacturing accelerated

the locational shift in production, provided foreign firms with the opening they needed to enter U . S . markets, and contributed to a secular shrinkage of American tire markets.

A decision by U.S. tire companies to postpone radial tire manufacturing permitted foreign firms entry into American tire markets. During the sixties, domestic tire firms realized that eventually the U.S. inarket would convert to radials. However, in the short run, a number of obstacles blocked that conversion. As of 1965, quality control problems and technical difficulties in manufacturing radials for the larger sized American cars plagued tire companies. Use of radial tires as original equipment required inodification of vehicle suspensions at a small, but not insignificant cost. Radial manufacturing required different equipment than bias ply production and the cost of industry-wide conversion to radial production in 1965 was estimated at over $700 inillion. Given these substantial conversion costs, U.S. firms chose to build a less labor-intensive, bias-belted “transition” tire. This hybrid tire allowed the industry to pursue a slower, phased-in conversion to radials which would be completed by the eighties.‘

‘The 1lias-l)elted tire, while technically inferior to the radial, was an iin~~rovemeiit over the bias tire. It didn’t require new auto suspensions as radials initially did, it could lie manufactured on existing bias ply tire inachinery with only minor modifications, avoiding the large investinent in new equipment radials required, and it was also less hbor-intensive than the radial (see Dick. 1979).

The U .S . Tire Zndustry I 233

Foreign penetrution. The decision to go with the bias-belted tire left an opening in the key high price and performance passenger tire inarket segment. This gap coincided with the major European and Japanese markets for radial tires reaching saturation point; decreased tire sales, idled capacity, and reduced profits ensued in these markets. However, earlier conversion to radials had forced foreign manufacturers to confront the technical difficulties of larger sized radial construction sooner, providing both a technological lead and a quality differential over U.S. producers. Despite a price disadvantage at the time, foreign tireinakers made inroads into U. S. markets.

This trickle of imports turned to a surge during the seventies. The sales growth of fuel-efficient foreign autos and the 1973 oil embargo forced Detroit and the public to switch to the gas-saving radial more quickly than forecasted by domestic tire companies. In just two years, froin 1973 to 1975, radials' share of the U.S. tire market grew from 13.6 per cent to 37.8 per cent. U.S . tire firms could not keep up with inarket demand, thus encouraging foreign firms to begin production in the U.S. Increased radial sales cut deeply into the inarket for tires of earlier designs, leaving excess capacity in bias tire facilities, yet insufficient U.S. radial capacity. This led to a wave of plant closures by U.S. producers during the seventies, as they retired excess bias tire capacity.

Meanwhile, the market shift to longer lasting radials, coupled with a decline in the long-term growth of auto sales and niileage driven per vehicle led to a substantial decline in tire sales growth. During the seventies, total average annual tire shipment growth actually declined by 1 per cent a year. Shipments picked up during the eighties, but 1984 total tire shipments were still below 1973 levels. These pressures only exacerbated the traditioiial cut-throat pricing which has long characterized major U.S. tire markets (see Gettell, 1941; Knox, 1962; Dick, 1979). Finally, radial production required 20 to 35 per cent more labor than bias tires, with the greatest difference in stages of production.5 A tirebuilder can only build 100 radials in the time required to build 150 bias ply tires, a 33 per cent decline in productivity. Moreover, quality control and inspection of radials is more labor-intensive than for bias ply tires. In some cases, the percentage of scrap or defective radial tires is twice as high as with conventional tires6 The necessity for strict quality

5The lal)or-inteiisive stage in production is the tire I)uilding phase.. Even today, a worker inust asseml)le the com~~o~ient parts of the tire manually I~efore applying heat and centrifuge. Tire compmies have tried to autoiiiate tirel)uiIding since the thirties, ;is wildcat strikes b y tire 1)uilding departiiients alone can shutdown an entire plant's operations. For ail excellent description and discussion of the tire production process, see Dick (1979); for a look at the power of tirel)uilders and other tireworkers in disrupting production. see Kiihn (1961).

"Background papers to concession agreeinent negotiated between the Goodyear Tire Company and U H W Local #831, representing the Goodyear Daiiville, Virginia plant, Akron. I)eceml)er, 1984.


control standards exacerbated the problems caused by a workforce historically stubborn and prone to sudden work stoppages (Roberts, 1944; Kuhn, 1961; Jeszeck, 1982).

The Impact of Structural Change on Industrial Relations The introduction of the longer-lasting radial tire allowed foreign

penetration of U.S. markets, as well as reducing overall growth prospects for these markets. Increased competition for sales in declining andlor stagnant markets placed greater pressures on domestic tire companies to reduce costs. Management responded to these new developments by attempting to win less expensive settlements during national collective bargaining negotiations, while also trying to eliminate various shopfloor work practices through the negotiation of local concession agreements. These efforts led to the negotiation of plant-level concession agreements; the dispersion of tire production to unorganized plants; and the decline of pattern bargaining.

Plant-leuel agreements. The United Rubber Workers (URW), a CIO affiliate, organized the bulk of the tire industry during the thirties and early forties (Anthony, 1942); labor relations in the industry were quite stormy during those years (McKinney, 1938; Roberts, 1944). An industry-wide pattern bargaining structure stabilized union-management relations during the fifties, with little change through the late sixties (see Winters, 1949; Sobel, 1951; Ludolf, 1964). Although some significant work stoppages occurred, bargaining became relatively peaceful and institutionalized.

Historically, wages in tire plants have moved in tandem with increases in the Big Three auto contracts. This principle has been the cornerstone of URW bargaining demands since the forties. However, the shift to the radial tire and competition from imports and nonunion plants intensified cost pressures on the industry. Cost-cutting efforts focused on wages, which were about 25 per cent of total costs and which also represented an area where Companies felt that they could exert more control, as compared to international raw material or energy prices. Severing the link between auto and tire wages was viewed as the key to effective control over labor costs.

Tire companies also focused on modifying plant workrules. The stability achieved in national bargaining obscured the more conflictual interactions on the shopfloor of many tire plants. Labor militancy, cost-plus production during World War 11, and a unique manufacturing process which left management vulnerable to sporadic work stoppages, resulted in the development of workrules and “loose” wage or piece rates. Contract bargaining, arbitration decisions, and unauthorized work stoppages maintained these workrules and wage de-

The U S . Tire Industry I 235

terminations (see Simonetti, 1954; Kuhn, 1961; Lichtenstein, 1974; Jeszeck, 1982).'

The shift to nonunion plants. Between 1967 and 1985, 17 tire plants were constructed, mostly in the southern part of the U.S. During the sixties, the URW was able to organize these plants quickly. The union has had considerable difficulty organizing during the seventies and eighties, however. Of the nine tire plants constructed since 1970, only one has been organized, while all 21 plants built during the sixties were organized.

The dispersion of tire production to new unorganized plants-especially during the seventies-aided the industry in pursuing both its local and national bargaining strategies. Locating production in nonunion facilities reduced union bargaining power in national negotiations by reducing the lost production occurring from a work stoppage. Since the late sixties, the nonunion portion of the U.S . tire industry has grown steadily. Production in nonunion plants increased from 7.3 per cent of total industry capacity in 1967 to over 19 per cent by 1984, with the number of nonunion plants rising from three in 1968 to nine in 1984 (Modern Tire Dealer Annual Facts Directory, January, 1985).

Dispersion through the closure of organized plants also increased managerial bargaining leverage during local negotiations with other organized plants; all of the 22 plants closed during the seventies were organized. Moreover, firms often concentrated radial tire production in nonunion plants, leaving increasingly obsolete bias ply production in the older, organized plants. Very often, these closures created a threat effect during local bargaining with the remaining organized facilities. Local unions increasingly viewed plant closures as a real alternative for management.

The dispersion of production also aided industry efforts to achieve workrule modifications. New plants would be unorganized initially, allowing tire firms to determine plant operation unilaterally. Even if these new plants later organized, the legacy of the inany years of workrules developed at the older organized facilities would not exist.

Changes in bargaining structure. Bargaining over wages, pensions, medical coverage, and general working conditions typically occurs on a three-year cycle in the tire industry. The UKW negotiates company-wide master agreements with the Big Four (Goodyear, B. F. Goodrich, Firestone, and Uniroyal) in late April, followed by a master agreement with the fifth major producer, Gencorp, in mid-May. Over the past 20 years, this pattern bargaining has

-These developriirnts wrre also inentioued I)! tire industry otFicia1.i in tli.;cussious with the aiitlior a ~ i d in Goodyear comlxiiiy dociiiiirnts in the ii~~tlior's pos\\ession.


slowly eroded. Even when new plants were organized, firms increasingly resisted their placement into master agreements. Single plant nonmaster agreements, coupled with a growing nonunion sector, allowed firms to whipsaw individual locals, as well as to reduce the costs of a concerted work stoppage at all master agreement facilities.

Increased competition and declining market growth also have increased stress on the existing pattern bargaining structure. Some key domestic producers, like Goodrich and Uniroyal, suffered financial difficulty during the late seventies and began to exit from key market segments in order to concentrate on market niches where they were strong. In contrast, other firms, like Goodyear, expanded their presence in all market segments. This divergence in performance eventually resulted in a divergence in industry bargaining strategy and objectives. The consequence has been a greater effort by individual firms in both situations to abandon the industry-wide pattern bargaining structure in order to bargain on an individual company-wide basis. Weaker firms felt that such individualized bargaining would lead to cheaper contracts based on their faltering financial conditions; stronger firms felt that they would achieve superior contracts going it alone.

A 20-year review of national bargaining outcomes illustrates all of these trends. The union has so far staved off the collapse of the national bargaining structure and at least until the mid-eighties has also been successful in maintaining its historical relative wage position. However, this maintenance of even a nominal national bargaining structure has come at the cost of a growing number of local concession agreements which have afforded the industry considerably increased plant flexibility and productivity improvements.

National Level Bargaining, 1967-1985 Both union and tire company officials point to 1967-the be-

ginning of the move away from the bias ply tires-as the watershed year of industry bargaining. After 1967 relations deteriorated, with major strikes occurring during every negotiating round until 1982. The industry adopted aggressive bargaining strategies and resisted unionization more vigorously at the plant level. These shifts in the bargaining climate are examined in detail in this section; for analytical purposes, the post-1967 period is divided into two sets of bargaining rounds.

The 1967-1 976 period. During these years, the industry shifted towards a more offensive stance in its bargaining policies. Although tire manufacturers had publicly attacked the union during previous negotiations for making excessive demands, the fiTst assault on the tandem wage principle occurred

The U . S . Tire Iiidzrstry I 237

in 1967. To reduce tlie effectiveness of the UKW’s whipsaw strategy of targeting, and if necessary striking, only one company at a time, a mutual assistance pact (MAP) among the five majors was formed for the first time in 1967. The MAP stipulated that if any company was struck, the remaining nonstriking firms would fulfill its orders and remit the payinelits to the struck firms, preventing any erosion in profitability or market share of the struck firms. The URW responded by trying to strike all of the major firins simultaneously, but was unable to do so in 1967. Several long (97 days) strikes against two of the major tire companies finally led to a pattern agreement with Gencorp. The other firms grudgingly settled soon afterwards, maintaining wage parity with the auto industry.x

Negotiation of a COLA provision in the automobile industry prompted the URW to add a COLA to its bargaining objectives in 1970. This bargaining round was also marred by long individual strikes against several companies. This time, the union was less successful in maintaining parity with auto industry wage levels, especially among the skilled trades, whose wages fell behind their UAW counterparts as a result of the settlement (Jeszeck, 1982).

The 1973 bargaining session was complicated by the fact that the tire industry was the first major bargaining industry to test the Nixon a~~ministration’s newly established Phase TI1 guidelines. The union feared that the government night take action if a major work stoppage occurred over wages. This bargaining round resulted in short piecemeal strikes against several niajor companies, no explicit industry pattern contract, and an overall henefit package which failed to include a COLA.”

During this period, the industry’s new hard line did restrain compensation and wage growth. The tandem wage principle had been significantly eroded and the industry had avoided negotiation of any cost-of-living provision. Total compensation for tireworkers fell from a 1967 level 6 per cent ubor;e the auto industry to only 88 per cent of auto workers’ wages by the end of 1975 (see Table 1). Wage growth barely matched inflation and actually lagged behind tlie increase in total manufacturing wage growth.

Meanwhile, the unforeseen and dramatic market shift to radial tires heginning during the 1973 oil crisis left domestic firins with a mismatch between product

’C;eiierid \\‘as the only major tire fir111 not \truck at an\. tiine during 1967. The provisions of the hlAP resulted in General inakiiig sigiiificaiit protliiction and financial contrilnltions to the struck firins. Given these payiiieiits, its smuller size. and the small nii inlwr of plants in a master agrertnent. General h;td strong inceiiti\.es to wttle. Once aiiy of the iiiajor firm.; reachetl an agreement, the hl AP I)ecame inoperative. so General’s agreement pliiced pressure on the otlwr inajor firins to reach a contract.

’hiany workers at the older lhcilities \vere dissntisfietl with the peiisioii provisions. \ \ ’orken at the modern (and often Southern) plants were i i iore tlissntisfietl u i t h the ;imount of the wage increase.. wliicli averaged s.77 over three years and \KIS less t h l the s.82 an h o u r wage hike negotiated in the 1970 contract. See sekctetl issues of the A k r m Betrcofi ~ f~~ff - f ld, April to ]ulle. 1973 tor a ~Oiil~>~eheilSi~e coverage of the tire 1)argaining sessions.


capacity and market demand. The number of imported radial tires grew steadily, while U. S. firms remained unable to add sufficient radial capacity. Although profitability improved by 1976, these developments placed greater pressure on the domestic industry to continue the hard line tactics begun in previous negotiations. The industry entered bargaining with a massive tire stockpile, a continued erosion of the master contract coverage, and the MAP. Despite these advantages, however, after a major industry-wide work stoppage which eventually idled close to 60 per cent of national capacity, management was forced to backdown. The negotiation of a COLA provision analogous to the auto industry's, together with a substantial wage increase over three years, virtually re-established the tandem wage relationship with the automobile industry.

The 1976-1985 period. The continued shift to radials led to growing excess capacity in bias ply tires, contributing to a wave of unionized bias tire plant closures beginning in 1978. Sluggish growth and growing import competition

TABLE 1

WAGE RATES FOR PRODUCTION WORKERS AND PRODUCTIVITY GROWTH R.+TEs, 1967-1984

Average Hourly Wage Rates Year Motor vehicles Tires and tubes (2) as a Productivity

and equipment % of(1) growth rates,

(1) (2) (3) (4)

(SIC 371) (SIC 301) tires and tubes (SIC 301)

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

3.55 3.89 4.10 4.22 4.72 5.13 5.46 5.87 6.44 7.09 7.85 8.50 9.06 9.85

11.02 11.62 12.12 12.61

3.78 4.02 4.21 4.31 4.59 4.91 5.23 5.44 5.68 6.37 7.23 7.82 8.59 9.71

11.05 11.66 12.35 12.97

106.5% 103.3 102.7 102.1 97.2 95.6 95.8 92.7 88.2 89.8 91.6 92.0 94.8 98.9

100.3 100.3 101.7 102.9

1959-1970 1971-1977 1970-1979 1980-1984

+5.7% -3.7 +5.9 +6.2 + 2.0 - 1.3 - 1.3 + 0.5

+ 10.8 - 5.5 +7.1 +2.0 +0.7

+ 11.6 + 11.5 + 6.6 +7.0est. +7.0est.

4.31% 0.86% 1.76% 9.18%

Swrcer: L'. S. Departinelit of Labor, Eii ip~uyir~?i i t o r i d Enriiirig.s:.F: LJiiifcd States, 1909-198.3. BLS Brillrtin 1312-12. 1985; L', S. Departinelit of Labor, Prudricficit!/ Measrrros for Sc,/ected lridii,$lrie,s, 195-1985. RLS Bulletin 2224, Februar)., 1985. Etisiiiess Week, April 22, 1985.

The U . S . Tim lndirstr!y I 239

reduced profitability for many U. S. tire companies. These difficulties spilled over into the industry's bargaining strategy.

By 1979, B.F. Goodrich and Uniroyal, both of which were in financial difficulties, wanted very niiicli to avoid a strike and adopted a conciliatory attitude towards the union. Firestone, suffering a financial setback from the Firestone 500 radial recall, also wanted to avoid a strike. Months before the official Ixirgaining negotiations, Firestone signed a "me too" agreement with the LJKIV, automatically agreeing to any industry-wide agreement. The 1979 pattern agreement was reached with only one firm (Uniroyal) struck!" The union was able to continue its success froin 1976, winning a significant wage increase and an improved COLA provision to maintain relative wage parity with the auto industry, as well as plant closure protections.

The unique circumstances of the 1979 negotiations masked the underlying trends shifting bargaining leverage towards management. Despite some early success, the industry was unable to use national negotiations a s the principal vehicle for slowing labor costs through 1979. This fkilure undoubtedly contributed to a continued dispersion of production away from organized facilities, to the further erosion of master agreement coverage, and to efforts to withdraw from pattern bargaining. I n 1978, Goodrich tried to buy its way out of the pattern bargaining arrangement; the union rejected the proposal. Uniroyal had to stave off bankruptcy with the help of a 1980 company-wide concession agreement worth $54 million, including a 15 per cent wage reduction, lower pension contributions, and the closure of two plants.

By 1982, management's liargaining fortunes again shifted. In 1982, total tire shipments were tlie lowest since 1967 and these depressed conditions led to tlie first settlement without a conipany-wide strike at a major firm in more than 15 years. The pattern agreement called for a wage freeze, but maintained existing COLA provisions and included minor improvements in pensions and medical insurance.

For almost all tire companies, production and profitability were up in 1983 and 1984! ' Plant closures and local concession agreements caused productivity to skyrocket (see Table 1). Yet, even with iiiiproved industry conditions, the union settled fbr a moderate package. The UKW chose Goodvear as its target,

~ ~~~

'"L1iiiro!al \vas struck for six \ v t ~ k s diiriiig 197Y. The L l l l \ \ ~ \vas a\v;Lre of the coiiipmiy's fiirancial tlitficiiltiea iiiitl (lid not want t o strike. Ho\ve\ er. mist;ikes on the part of the LTniroyd hirgaiiiiiig teain (the! reneged on ii proposed settlement) lrtl t o the \vork stopp~ge (see J e s z r ~ k . 19x2).

"The ;iverogta r;itc of return oil coiiiiiioii eqiiit! h r the LT.S. tire iiidiistr! WIS 9.8 per cent i n 1984 and 8.4 pel- cent in 1983. with iiiiicli of these enrniirga accounted fbr by tloiiiestic tire operiitiotis. \\%ik t h e figul-taa ;ire h v for L1.S. muniit~ictiiring a s ii \vholr. they are quite good t i ir the tire industr!.. Cootlyear h;itl ;I pirticiil;irly strong y t w in 1984. ;ind L'iiiro!,iil Iias rel~ouiitletl from i t s serious fiscal coiitlitions of 1979-1980, Gencorp is one firm tliat did not do \veil over this period, piirtially I)eciiiisc of t u o long strikes ;inti ;I lockout ;it its tire plants (see Birsiricw \\'Cd, hlarcli 21. 1984 and hlarch 22, 1985).


a company which generally has been quite aggressive during negotiations. This choice indicated an attempt by the union to maintain the existing bargaining structure; a contract with industry leader Goodyear would be more easily accepted by the other companies. The new agreement raised total compensation by only 15 per cent over three years, assuming a 4 per cent annual inflation rate; and it included only a 3.5 per cent wage increase spread out over three years (see Business Week, May 20, 1985). Most of the increase in compensation was due to estimated COLA payments.

For the 1985 negotiations, conditions similar to those in 1976 prevailed- but the bargaining outcomes differed markedly. In both years company profits were high, with the union coining off of subpar negotiations in previous rounds. Bargaining in 1976 resulted in a four-and-one-half month strike and a large settlement for the union; the 1985 negotiations resulted in a peaceful and low-cost pact. One crucial difference is that in 1976 the union was able to shutdown over 60 per cent of the industry during the peak of the strike and conceivably could have closed 75 per cent. Today, the most the union could achieve is probably closer to 40 per cent, and increased imports would soften even this blow!2 An aggressive management position might well have won a still more moderate settlement. Why management eased its stance and what partly prevented a complete collapse of the existing pattern bargaining structure were the moderate auto settlements. These reduced the costs of maintaining the tandem wage principle. Most important, however, was the industry's considerable success in negotiating local concession agreements.

Local Level Bargaining, 1967-1985 In the tire industry, national bargaining over wages aiid benefits

is coupled with local, plant-level negotiations that often focus on the issue of union-supported work practices. During the seventies, inanageineiit became increasingly successful in negotiating concessions on these practices. Local concession agreements were extremely rare before 1967 (see Table 2). Between 1967 and 1970, two plants signed agreements covering tire-related production, out of about 55 unionized tire facilities. Between 1982 and 1985, 22 local concession agreements were signed at 18 tire plants, out of 35 organized plants in the industry.

I2As of January 1, 1985, assuming that the URIV struck tlie Big Four tireiiiakers simultaneoiisl~. the union could shutdown 42.9 per cent of total industry capacity. However, since that time, with the new closures aiiiwiinced by Goodrich aiid Firestone, this percentage has fdlen to 33.5 pt-r cent. If the UH\V Armstrong locals agreed to join a strike, this percentage worild rise to 40.3 per cent. See Aforlerri Tire Deuler Anrucul Fucts Directory. January, 1985.

The U S . Tire Indirstry 1 241

TABLE 2

TIRE P L A N T S N EGOTI A T IN(; LOCAL CONC ESSION AGHE E 51 ENTS , 1967- 1985

Year Five majors' 2nd tier producers"

1967-1970 1970-1973 1973-1976 1976-1979 1979-1982 1982- 1985 Total

1 2 2 3 9

17 34

"The "five majors" include B. F. Goodrich, Goodyear, Firestone. Uniroyal. m d (kncorp. In Ap-il, 1986 Uniroyal x)ld its tire manufacturing division to B.F. Goodrich. "Second-tier companies include Armstrong, Mohawk. Cooper. Dunlup, Bridgestone, Mansfield, McCrear! ~ and Denman. Sources: The characteristics of concession agreements w e i ~ obtainrd froin L'RW Research Department contract files and discussions with representatives of the URW Research Department. Akron. Ohio in 1980 and 1984. Additional information was obtained from selected issues of the Xlodcm Tire Dmlc,r, 1968 to 1984. Other infornution \vas obtained from Jeszeck (1982).

The pre-1979 period. The context of negotiations and the specific issues identified during bargaining before 1979 are quite different from those in agreements that followed. During the earlier period, all of the concession agreements involved older, nonrddial tire facilities which generally had not been maintained in recent years?3 In each instance, the plant was threatened with either closure or a substantial loss of employment unless the local union agreed to concessions. In only two instances prior to 1979, at Goodyear's Gadsden, Alabama and Topeka, Kansas facilities, was new investment proposed by management as a meaningful possibility in return for union concessions.'-' Most threatened plants were closed eventually, even with the concessions. In retrospect, it is doubtful whether any concession agreement that did not include a corporate commitment to new investment could have kept the plants open.

During this early period, concessions revolved around worknile modifications, including changes in the number of craft classifications, the elimination of department-level production caps, switches to day work from piece work, and reducing down-time pay levels. While extremely important to the workers involved, these changes were generally not as extensive as those proposed after 1979. There were no explicit wage reductions in any of these agreements, and in almost all cases workers could maintain their prior income levels by

I3See Jeszeck (1982) for a siiinmary of the location of tire plant investment fiintls during the sixties and seventies.

"Goodyear is the only tire company with a long history of actually exchanging new investment for union concessions. It had negotiated department-level agreements of this nature with its Akron 1OCdI

during the sixties. One of these involved construction of a new tire mold plant in the Akron area during 1968; the other concerned new tire equipment for the Akron plant. Neither involved workrille changes of the magnitude of those agreed to in the Gadsden and Topeka concession contracts. (Copies of local contracts and transcripts of interviews with Goodyear and URN' local #2 officials, Akron, 1979. )


increasing production. Finally, there was little difference among tire companies with the approach taken towards obtaining concessions. Many management demands and the tactic of playing local unions off against each other for concessions were similar across firms.

The post-1 979 period. In the later period, concession agreements have entailed major workrule changes, including shifting departments from piece to day work pay and establishing seven-day, continuous operations with reduced premium pay provisions. Switching to day work allows management to sidestep the joint labor-management time study committees, contract language, and arbitration decisions which have regulated piece rate determinations in the tire industry since World War 11. As in the earlier period, workers are able to maintain their previous income levels by increasing their levels of output !”

After 1979, concession agreements were negotiated at radial plants as well as at older facilities. In all of the latter, plants were still being threatened with either closure or loss of substantial employment. However, in 1979 variations began to appear both in the type of agreements negotiated and in the managerial policies used to obtain concessions. In later agreements, a larger number of contracts exchanged workrules for new investment (see Table 3). Some agreements promised new investment if it “was warranted by market conditions.” In other cases, especially where state and local governments also provided concessions, agreements were more explicit. In the one instance where market conditions no longer “warranted the construction of a new facility,” Gencorp rebated a $.36 hour wage cut to its Akron tireworkers?

Explicit wage cuts were negotiated in some later agreements, although they were still not typical and generally involved older plants. Such cuts usually were negotiated at facilities in danger of being closed because of age,

lSNot all major firms focused on modifying payment methods. For example, B. F. Goodrich, Gencorp, and Dunlop have not moved away from piece work. At Gencorp and Dunlop, management instead has retirned existing piece rates and increased the income differential between jobs within the existing wage structure to put “incentive” back into the piece work system. Dunlop actually increased the percentage of workers on piece work, again to boost individual production incentives.

IfiGencorp had approached its Akron local for concessions after the 1979 master agreement. Gencorp offered to build a replacement truck tire plant for its Akron facility if the concessions passed a three-year trial period and economic conditions warranted new construction. While a 9.36 wage cut “to pay for the new plant” was one concession, the key provisions involved workrule modifications like seven-day, continuous operations, the collapsing of 259 craft job classifications to 27, a retiniing of piece rates, and a restructuring of the plant internal wage systeni to increase production incentives. By 1982, Gencorp had decided to diversify and abandoned all plans to build another truck tire plant. This led to the closure of the Akron facility and the rebating of the wage reduction. (Discussion with Gencorp Industrial Relations and URW local #9 officials, Akron, 1980; Akron Beacon Journal, April, 1982.)

The U S . Tire lndustry I 243

TABLE 3

TAXONOMY OF TIRE INDUSTRY CONCESSION AGREEMENTS 1967-1984"

Characteristic Number Number of agreements of agreements

1967-1979 1979-1984

Agreements including workrule modifications 14 2

Agreements negotiated under the threat of a reduction in 13 operatiodplant closure

3 2

incentivedchange in intraplant wage structure 1

Total agreements 15

Agreements specifying explicit wage cutslCOLA health benefits

Agreements exchanging new investment for concessions Agreements specifying shifts from piecework to daywork

Agreements specifying seven-day continuous operations

34 6

32

6 13

25 34

~ ~~ ~~

'Concession agreements in the tire industry have occurred at the following facilities: Goodyear-Akron. Ohio. Gadsden, Alabama, Cumberland. Maryland, Tyler, Texas. Dandles, Virginia, Freeport, Illinois, Fayetteville. North Carolina. Firestone-Akron and Barberton. Ohio, Memphis, Tennessee, Des Moines, Iowa, Bloomington and Dtratur. Illinois, Oklahoma City. Oklahoma. FirestonelBridgestnn~Lavergne, Tennessee. DunlopBuffalo, New York. Huntsville, Alabama. B.F. Goodrich-Akron, Ohio. Uniroyal-Eau Claire, Wisconsin. Opelika, Alabama. GencorpAkrou, Bryan, Ohio, Charlotte. North Carolina. Mayfield. Kentucky, Warn, Texas. Mohawk-Akron, Ohio. Mansfield-Mansfield, Ohio. Cooper-Findlay, Ohio. Texarkana, Arkansas. Armstrong-Nashville, Tennessee, Natchez, Mississippi. Summing the columns does not add up to the totals because of multiple inclnsions. Source: Information derived from snmmaries oflocal contract files, URW Research Department, Akron, Ohio. December. 1980 and 1984.

poor product mix, or corporate insolvency. In only one case, at Goodyear's Cumberland, Maryland plant, was the wage reduction substantial!' As of 1985, wage cuts have not appeared in concession agreements involving modern radial tire plants at any of the companies.

Despite a greater variation in the type of concessions in the post-1979 period, most agreements have centered on workrule modifications rather than changes in master contract wage and benefit provisions. The most wide- spread workrule change by far has been the shift to a seven-day, continuous operations work schedule with reduced premium pay. As of 1985, over 70 per cent of total U.S . tire capacity is either on or moving towards some form of seven-day operation. Continuous operation offers tire companies important advantages. It boosts capacity b y 16 to 40 per cent. By more effectively utilizing their existing radial tire capacity and facilities, firms can minimize expensive new radial plant construction and expansion. Seven-day operation also fits well with company efforts to reduce the total number of tire sizes __ .~ _ _ _ _

'The contract Iwtwern URN' local #26 and Goodyear's Kelly Springfield subsidiary in Cunil)erland, blaryland included a nunil)er of significant coi~cessions. h pay freeze was instituted until Goodyear saved $1 an hour in COLA payments. This lrrrzr was expected to last four years. Tirr workers also agreed' to pay 15 per cent of their annual medical costs u p to ~ 1 , O W . A shift from piece work to da! work was negotiated which would provide small wagr iiicreases for some production workers. but 12 to 37 per cent wage decreases for tire1)uilders. This concession W;IS highly unusual. as in most cases tireliuildt.ra are the one group of workers left oii piece work. Furllirr. in those cases where tirehuildrrs are moved to daywork, thry art. gencrally able t o maintain previous wiigt. levels, ;illwit with increased production (Rtrbber arid Plastics ~ ' E I C S . Felirriary 20. 1984).


produced, to concentrate on particular market segments, and to meet the recent increase in sales to Detroit. Continuous operation has been a major part of the industry’s recent rationalization of production, contributing to the tremendous productivity increases during the eighties (see Table 2).

Workers have opposed the imposition of continuous operation. While the size of the workforce is increased, the amount of overtime available is reduced. In many plants, tireworkers formerly received time-and-a-half pay and double- time pay for weekend work. With continuous operations, premium pay scales have been largely eliminated. A more difficult issue concerns the scheduling of continuous operations. Some variations of the seven-day schedule allow for a fixed five-day workweek for most employees, with special two-day 12 hour weekend shifts. Other scheduling formats generated even greater op- position; these involved rotating shifts with six-day workweeks for all workers.

Labor Relations in the Post-1979 Period In some ways, the industry has now come full circle. During

the thirties, a six-hour a day and six-day a week work schedule was standard practice. It was slowly eliminated and virtually gone by the seventies. Today, the six-day work week is back, only with an eight-hour day and no premium pay for weekend work. The recent wave of concession agreements also illustrates a sharpening divergence between managerial bargaining policies and labor relations in different firms. While many firms are getting tougher with labor during bargaining, other companies are trying to foster an improved labor- management climate through closer cooperation with the union.

Increased labor-management cooperation has been most popular with tire firms that are in serious financial difficulty. Uniroyal received concessisons from the URW in response to clear managerial difficulties and near financial collapse. The union made concessions in return for greater access to company records, improved labor-management cooperation on the shopfloor, a corporate commitment to avoid all future closures if possible, and a profit-sharing plan. The company has also exchanged new investment for local concessions. In Uniroyal’s case, concessions seemed to have worked. The company’s profitability improved dramatically, and the firm agreed to the industry pattern package in 1985 after two national below-pattern concession pacts.

In contrast, the industry’s healthier firms have generally been more aggressive in their labor relations. Goodyear, committed to maintaining its leadership in world tire production, garnered concessions from local unions and state and local governments to construct new plants and expansions it might have placed in those locations in any event. However, the company expanded production in those unionized facilities that agreed to its conditions and has

The U S . Tire Industry I 245

stayed with the pattern agreement. Moreover, despite threats to avoid unionization, Goodyear still has only one unorganized tire Facility.

During the late seventies, the industry shifted its efforts to control labor costs from national bargaining to the local level. This switch seems to have been motivated by the industry’s failure to win low-cost settlements during the 1976 and 1979 bargaining sessions and by a growing desire to improve production flexibility. During the eighties, the industry has been extremely successful in winning local workrule modifications, contributing significantly to increased productivity and somewhat reducing pressure on the industry’s national bargaining structure.

Conclusion In many organized sectors of the economy, management appears

to be more able to resist union demands effectively. As Friedman (1985b) has concluded, “Management has increasingly gained the upper hand in negotiations.” (See also Friedman, 1985a.) Further, long-term and stable bargaining structures appear to be in flux. Are these developments short- term consequences caused by adverse cyclical economic circumstances or are they a more permanent condition caused by structural changes in the economy? This case study analysis of national and local bargaining in the tire industry suggests that structural changes in the economy have led to changes in collective bargaining of a more permanent nature.

The U.S. tire industry has changed dramatically over the past two decades. Twenty years ago the industry was largely insulated from foreign competition and operated in markets with steady, if slow, growth. Today, U. S. producers face substantial foreign competition for shares of an at best stagnant market which is dominated by a technologically superior product they initially refused to produce in sufficient quantity. These forces also contributed to the tremendous dispersion of tire production from the U . S. Midwest to the South; a dispersion which management increasingly utilized to its advantage in bargaining with the union.

These factors deeply affected the industry’s bargaining relations. Growing competition for a declining market placed greater pressure on firms to take a hard line during national and local negotiations. Although management achieved only limited success with this stance at the national level, it has resulted in a steady decline in the percentage of the industry organized and the percentage of the industry covered by company-wide master contracts. Meanwhile, continuing the dispersion of production and threatening local unions with closures and layoffs enabled management to win significant concession in local agreements throughout the country.


All of these events increased the stress on the industry’s bargaining structure. By the 1985 negotiations, only the ability of tire firms to gain workrule concessions at the local level, thus reducing the costs of the pattern agreement, seems to have prevented explicit deviation from the pattern agreement. This managerial success at the local level is in marked contrast to the union’s historical strength at the point of production (see Kuhn, 1961; Jeszeck, 1982). However, strain on the industry’s national bargaining structure will increase if local concessions yield reduced savings in the future. The financial weakness of some of the industry’s major firms also has created problems for the existing bargaining structure. The union must maintain a seemingly impossible balance between the need to help weak firms achieve a meaningful contract and the need to prevent stronger firms from leaving the pattern agreement altogether.

The situation in the tire industry is not unique. Other industries, too, are experiencing structural change and the accompanying alteration of collective bargaining patterns. In basic steel, import competition and a declining market have led to numerous concession agreements and the coordinated bargaining between the major steel producers and the United Steel Workers has now deteriorated into an individual company-wide bargaining structure. Bargaining leverage in the industry also seems to have swung decisively towards management. Similarly, foreign competition and adverse market conditions have affected U. S. auto manufacturing and ineatpacking.

What could reverse these developments? An alternative national economic policy might slow the pace of these structural changes sufficiently to minimize disruptions accompanying adjustment. Increased labor-management cooperation, coupled with modifications of existing labor law to enhance the organizing prospects of unions inight be effective as well. A sustained and dramatic increase in worker resistance also inight serve to redirect these trends. None of these possibilities now appear at all likely. Barring some unforeseen developments, the future bodes more of the same: increasingly decentralized bargaining, rising nonunion production, and a growing inequality between labor and managerial bargaining leverage in American manufacturing.

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Documents

Structural Change in CB: The U.S. Tire Industry