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Breaking American Crystal’s labor logjam

American Crystal recently finished a strong fiscal year in which its revenue rose 28 percent to $1.54 billion.
American Crystal recently finished a strong fiscal year.

While Congress was holding the nation hostage last summer over the federal debt ceiling, American Crystal Sugar executives were girding themselves for a labor standoff.

On Aug. 1, American Crystal locked out about 1,300 union employees, most of whom work in the five factories that dominate the prairie landscape in the Red River Valley.

The threat of a strike or lockout usually offers enough incentive for both sides to move off of their positions and reach a tentative deal as a deadline looms. But there was a labor-management breakdown in Moorhead.

Tragically, the American Crystal lockout has entered its sixth month. It raises the question of whether this dispute will leave the bitter scars of the 2005 Northwest Airlines mechanics strike and the 1985 Hormel meatpackers strike in Austin.

The foremost responsibility of union leaders is to negotiate the best possible deal, which can only be determined by making an honest assessment of the workers’ leverage. If a strike or lockout occurs, can the company operate indefinitely with replacement workers? Can the company find qualified replacement workers? Does management have an unspoken desire to break the union? What kind of wages, benefits and work rules are showing up in other union contracts around the country? Can the union members and their families financially survive a long strike or lockout?

Rudy Perpich
Minnesota Historical Society
Rudy Perpich

Answers to those questions largely will determine how the American Crystal conflict ultimately ends.

In the Hormel and Northwest disputes, management pressed for wage cuts, union leaders pushed back, long strikes ensued and many union members lost their jobs.

In the Hormel strike, where DFL Gov. Rudy Perpich called out the National Guard, union members were hurt by fighting within the union family. At the national level, the United Food and Commercial Workers took over the controversial Local P-9 and put a trusteeship in place.

A deal was reached more than a year after the strike started.

Northwest dispute
Northwest Airlines, which filed for bankruptcy a month after the mechanics strike began, was seeking double-digit wage concessions from a work group that saw waves of layoffs in the years preceding the strike. Like American Crystal management, Northwest chose Strom Engineering to find replacement workers. After mechanics walked off the job in August 2005, the airline continued to operate with replacements. As members of the Aircraft Mechanics Fraternal Association continued to picket at airports around the United States, some union members and former union members crossed picket lines and Northwest benefitted from their experience as skilled mechanics.

The Northwest mechanics strike wasn’t resolved until late 2006. The strike lasted 444 days, the same length as the Iran hostage crisis. Northwest Airlines merged with Delta Air Lines in 2008 and today the combined work group is nonunion.

The Hormel and Northwest strikes were devastating to working people and they occurred before the Great Recession took a direct hit on middle-class Americans.

The Hormel and Northwest cases are not perfectly analogous to the impasse at American Crystal. But they are cautionary tales with lessons for labor and management.

The Northwest strike lasted 444 days.
REUTERS/Eric Miller
The Northwest strike lasted 444 days.

Union leaders and rank-and-file members have to be savvy about calibrating their leverage, and that sometimes means getting most of what you want and living to fight another day.

Lengthy strikes and lockouts are usually bad for business in the short run and long term. Even if American Crystal and the Bakery, Confectionery, Tobacco Workers and Grain Millers union can forge a deal soon, the healing process likely will take years.

In this labor negotiation, American Crystal has offered a pay raise, but union leaders are worried that there are loopholes in the job security language. The two sides also are divided over health care costs.

American Crystal recently finished a strong fiscal year in which its revenue rose 28 percent to $1.54 billion. But management faces potential storm clouds if Congress dramatically alters the sugar program.

Federal sugar program
The company wants Congress to extend the federal sugar program when it takes up the 2012 farm bill. “The sugar program continues to operate at no cost to the federal government,” American Crystal said in its annual report. That’s only half of the story.

Federal law currently restricts sugar imports, which drives up the prices on U.S. consumers. Taxpayers aren’t funding direct farm payments to the sugar beet growers, but government policy shifts the cost burden to consumers.

That sugar program has enjoyed political support from beet growers and union members.

If an ugly labor impasse persists as American Crystal intensifies lobbying on the farm bill, the company certainly will get more scrutiny in Washington. That’s why American Crystal can’t overplay its hand with labor.

U.S. Rep. Collin Peterson, who has represented Minnesota’s 7th District since 1991, understands the political and economic fallout that will occur if this conflict lasts much longer. Peterson is the ranking Democrat on the House Agriculture Committee, which he formerly chaired. He’ll be a lead actor on the sugar program debate.

The blunt Peterson may be the one politician who can nudge both sides back to the bargaining table and get them moving toward an agreement. Peterson previously warned about the danger of allowing this standoff to linger into the winter.

Union families are suffering and American Crystal is waging a high-stakes gamble through the lockout. Some more straight talk from Peterson, serving as an honest broker, might help to break a logjam that’s already created an abundance of harm.

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Comments (15)

  1. Submitted by Paul Udstrand on 01/05/2012 - 09:11 am.

    The problem is that we have the weakest labor rights and labor rights enforcement in the industrialized world. Half of the strikes and lockouts in this country simply wouldn’t occur if we had stronger labor labor laws that required good faith negotiation. Almost every labor dispute in this country is a result of union busting company agendas. Too many companies calculate that it’s better to bust than negotiate and the result is strikes and lockouts, and ultimately lower US wages and benefits.

  2. Submitted by Thomas Swift on 01/05/2012 - 12:50 pm.

    If Congress fails to reauthorize the sugar program, consumers may pay less for sugar, but you can bet sugar manufacturers will pass that along to their workforce.

    It is funny you mention the NWA strike, because the lesson it teaches really should have the sugar workers union bosses hair standing straight out.

    Aircraft mechanics are highly trained, highly skilled employees, but NWA still managed to find replacements for striking union guys. And as you point out, that worked out so well they just outsourced the whole shop.

    Now, I don’t know a whole lot about sugar manufacturing, but I’m guessing it entails a lot of cutting, boiling and refining…all automated.

    How this union comes to feel comfortable thumbing their nose at a 17% increase (over 5 years) is a complete mystery to me.

    Are they of the opinion pushing buttons takes a lot of training?

  3. Submitted by Rosalind Kohls on 01/05/2012 - 03:03 pm.

    My dad always said never take a vacation longer than 3 weeks, even if you’re entitled to it, because your employer will figure out how to get along without you. The laborers from American Crystal should heed my dad’s advice. The longer this logjam goes on, the more likely the company will figure out how to get by without them. Settle now.

  4. Submitted by Richard Schulze on 01/05/2012 - 05:23 pm.

    One of the unfortunate side affects of high unemployment is the surplus of those seeking work. Great for industry, not-so-much for labor.

    No matter how ‘righteous’ the cause may be. With so many folks unemployed it’s going to be hard to frame the issues in a way that would gather any significant public sympathy.

    It’s tough spot for labor to be in and don’t think mgmt won’t take advantage of it.

  5. Submitted by David Olson on 01/05/2012 - 06:15 pm.

    Ms. Fedor left out one vital fact about NWA… the AMFA engineers were locked out per the MN Court system.

  6. Submitted by Greg Ross on 01/05/2012 - 06:28 pm.

    #4 has it exactly correct. I refuse to buy any American CrystalSugar until the company offers a real increase in wages. The local beet farmer’s associated with Crystal Sugar should be supporting these workers who toiled heavily the last 2 seasons just to get the beets to the processing plant.

  7. Submitted by Logan Foreman on 01/05/2012 - 06:47 pm.

    End this corporate benefit program and all other such programs. Capitalism should not need them. Fascinating how happy these corporations are to accept government welfare.

  8. Submitted by Sandy Huseby on 01/05/2012 - 08:58 pm.

    The inflammatory tactics of American Crystal’s management team have shown there is nothing “unspoken” nor subtle about their intent to bust the union, divide workers from growers, and fearmonger.

    When the lockout began, I stopped buying American Crystal’s products. I’ve lived in Fargo a lifetime and like my neighbors, we’ve endured virtually every year the foul stench of thawing sugarbeets and been proverbially patted on the head and told to “get over it.”

    Now, the workers are being treated the same…and worse. North Dakota workers get no unemployment benefits because the North Dakota legislature refused and the unemployment compensation bureau refused.

    CEO Dave Berg has called the workers union a cancer. No evidence of good faith at all shown by him, just public posturing and grandstanding.

    Meanwhile, the lockout continues, the workers who devoted their lifetimes to American Crystal, even working through blizzards, suffer with their families.

    And I’ve developed a taste for cane sugar.

  9. Submitted by Ross Reishus on 01/06/2012 - 12:12 am.

    The union is turning the deal down because if they sign it there is language in the deal that will allow Crystal to lay them off indefinitely from season to season, with no guarantee of re-hire. To back down and sign the offer is to find themselves in the same place they are now, in 1-3 years, with no rights whatsoever. Or jobs. So that makes the whole 17% increase over 5 years pretty moot. That’s the rest of the story, but its conveniently missed by most mainstream media. As Amy Klobuchar says, “Follow the money.” New execs at Crystal gave themselves whopping bonuses after only a short time being there, and paid for it by dumping workers, hurting their families, and by extension, hurting the rest of us by contributing to an unstable economy, all for millions in bonus dollars for themselves.

    Efforts like this one are pure union-busting, in textbook style. When this kind of corporate activity is tolerated, it just ensures a future of economic instability. Low wages = low consumer spending beyond the necessities. The economy as we know it will never return to what it was until wages go up. Its not like the working class sits on their money. They keep it moving within the economy. But if they have no disposable income to spend, the engine of our economy grinds to a halt. Part of what keeps the economy stalling now is due to all of the jobs that have been sent overseas. The other part of it is that too many of today’s jobs pay little to nothing over the Federal poverty level. The economy won’t run on depressed wages, as Crystal is trying to do.

    With the effective price supports that result from suppressing sugar imports, the sugar industry should be paying their workers well in return for the blatant protectionism that they profit from. If they choose to stop doing that, they should no longer be protected from imported sugar.
    A company like this shouldn’t be allowed to use the word “American” in its name, if this is how its going to treat its workers.

  10. Submitted by John D Sens on 01/06/2012 - 06:07 am.

    I agree with the writer, but would add that both the company and the union are powerful entities that can hold out for a long time. If ACS had a good year with replacements, it may be time for the union to think about taking the latest offer. I don’t know if the union has the workers’ best interests or its own at the forefront of its considerations. It will take years for some of the hourly wage workers ever to “catch up” economically from the losses sustained as a result of the lockout, and if the union can’t compel the contract terms it is demanding its value will be greatly reduced in the eyes of all of its members. I agree with Karen Norin that there is more to this story. I urge all who are interested in this topic to read and consider ACS proposed contract.

  11. Submitted by Don Medal on 01/06/2012 - 07:25 am.

    Do the math. 1300 affected employees. (not all union). ballpark wages of $40,000? $52 million per year, total.

    The company made $1.5 Billion last year, after all expenses. Properly one would compare labor costs to gross profit, but let’s use the smaller net figure since that’s available. That makes labor costs 3.4% of NET profits.

    Which means labor costs are not going to sink this company ever. Most of these plants are cited in towns where they are the sole large employer paying a living wage.

    I myself don’t see any motivation but greed.

  12. Submitted by Dennis Tester on 01/06/2012 - 07:57 am.

    People shouldn’t be eating sugar anyway. It’s bad for you. These employees should be making hay while the sun shines because eventually they’re going the way of the tobacco worker.

  13. Submitted by Joseph Skar on 01/06/2012 - 08:50 am.

    Why is everyone using “corporation” this is a Co-op. The growers are the owners and the owners control management. So any of the aforementioned union-blasting is effectively being done by the growers. I understand that liberals by default blame corporations for everything possible but at least make an attempt to understand the type of entity you are slandering. This is a farmer v.s. labor issue not a corporation v.s. labor issue.

  14. Submitted by John D Sens on 01/07/2012 - 03:38 pm.

    #12 raises a valid point. However, as one who has been responsible for hiring, firing, compensating, and paying taxes and expenses incurred in having employees, I know from long experience that the actual wages paid to employees are only a part of the overall expense. There are various insurances such as workers compensation, unemployment, health, (depending on the arrangements), taxes, administrative expenses and many others that make having an employee much more expensive than just wages. In my experience, a good rule of thumb when deciding to hire an employee has been to proceed on the basis that the cost will be at least twice the salary or wages paid.

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