This article first appeared in the St. Louis Beacon: July 21, 2008 - When Anheuser-Busch and the Teamsters union discussed a contract renewal in 2003, negotiations went smoothly. They started talking in August, reached a tentative agreement in October and signed a deal in early December -- three months before the old contract expired.
Negotiators will return to the bargaining table next month. But 2008 may not be the same as 2003, when a union leader called the contract "a Cadillac plan" and the union membership overwhelmingly supported it.
Today's economy is shakier, and Anheuser-Busch is being acquired by Belgium's InBev. The union already has criticized InBev's treatment of blue-collar workers in several other countries.
The next contract will be complicated. Negotiations will begin while Anheuser-Busch is independent; the InBev takeover is expected to close by year-end; and the current contract expires at the end of February.
"Both sides have an incentive to get this done and settled" well before the deadline, says Hal Stack, director of the Labor Studies Center at Wayne State University in Detroit.
InBev can't negotiate directly with the union until the takeover is approved by shareholders of both companies and by various government regulators. They "continue to be separate, independent companies," August A. Busch IV, the CEO of Anheuser-Busch, told wholesalers during a July 15 teleconference.
"We can't make decisions or participate in making decisions that affect the other's current business policies or operations except as related to the existing import agreement until the proposed A-B/InBev deal closes," Busch said. This agreement covers Anheuser-Busch's selling of InBev brands in the United States.
Because management and labor don't want to delay meaningful negotiations, labor experts say there are ways to finesse the issue.
InBev "could have somebody there at the table saying, 'I'm here to establish a constructive relationship' to facilitate discussion," says Stack. "Or they could be in the back room whispering in the ear of the Anheuser-Busch labor relations vice president."
The complex circumstances, exacerbated by a weak U.S. economy, pose intriguing questions for both sides at a company where the union represents more than 7,000 workers.
If you're a Teamster, do you push for an early settlement, preferring to talk to Anheuser-Busch now rather than InBev later? Do you try to lock in a contract that provides a few years' cushion before the feared cost-cutters from InBev assume control.
"We are concerned about the amount of debt that InBev has taken on for this acquisition," says Jack Cipriani, a Teamsters vice president and director of the union's Brewery and Soft Drink Workers Conference. InBev plans to borrow $45 billion to finance the $52 billion deal.
"Where will the money come? Will it be at the expense of employees? Facilities?" Cipriani asks in a July 17 email response to questions from the St. Louis Beacon. He didn't comment on contract strategy.
Or should the Teamsters push the talks to the deadline? The union knows InBev wants to move quickly to raise revenue, cut costs, sell assets and retire debt. Does the union believe it has enough leverage to extract a generous contract because InBev will be occupied with many merger-related issues?
"If the Teamsters want to make life difficult for InBev, you could see a publicity campaign about foreign intruders taking American jobs," Stack says.
Labor negotiations are not only about labor and management; they're also about labor leaders appealing to their members and management negotiators appealing to their company's directors.
"Ordinarily these stakeholders want to know that their representative at the bargaining table have fought hard for their interests," says Charles Heckscher, a labor-management specialist at the Rutgers University School of Labor and Management in New Brunswick, N.J.
"In that case, it is almost required that negotiations go to the 11th hour," says Heckscher, who directs the university's Center for Workplace Transformation. "Otherwise people will start thinking you could have done more."
Sometimes management and labor, "through advance work and preparation," will convince their constituents that they can achieve better results through peaceful talks. "This takes time, however, and has to succeed on both sides to avoid a breakdown," he adds. "This is unlikely soon after a merger."
Heckscher adds that "sophisticated" negotiators could privately agree "on the basic parameters of a settlement" early in the talks "but continue to posture publicly for the benefits of their stakeholders."
MANAGING FOR THE FUTURE
Management has a dilemma, too. Anheuser-Busch is committed to making sure the takeover is completed easily, unless it wants to walk away from the deal and pay a $1.25 billion break-up fee. It doesn't want to hand the new owners an unresolved labor time bomb.
"It may be in management's interest to negotiate quickly due to the political environment," says Matthew T. Bodie, associate professor at the St. Louis University School of Law. "It also might be better for the Teamsters to get things done sooner rather than later."
Because Anheuser-Busch negotiators know the temperament of their union workforce, do they tell their soon-to-be Belgian and Brazilian bosses they want to avoid a down-to-the-wire game of hardball?
"If I were management, I would want to get it done so I could focus on the other merger issues," says Stack. He adds that his "greatest fear" would be for InBev to push for a series of rigid goals in the next contract.
Does InBev want to rock the boat after having promised to keep open all 12 U.S. breweries and to cause "little or no impact" on union jobs? Last year, these breweries operated at 94 percent of manufacturing capacity, indicating there's no need to close any of them.
Still, InBev includes a caveat in its promise about the plants. The merged company will make a "good faith commitment" to keep the breweries open, says a recent SEC filing, "provided there are no new or increased federal or state excise taxes or other unforeseen extraordinary events which negatively impact" brewing operations.
The document didn't provide details. A strike or major labor disruption could be interpreted as an extraordinary event.
Meanwhile, white-collar workers are fair game. Anheuser-Busch has already said it would cut 10 to 15 percent of its 8,600 salaried workers during this fiscal quarter. Analysts expect InBev to make more cuts in the near future.
While InBev and Anheuser-Busch played out negotiations in June and early July, the union became increasingly vocal about InBev. "If the pattern InBev management has followed overseas is any clue, labor costs will likely be one of the first places where it seeks to makes cuts," says a Teamsters website devoted to Anheuser-Busch.
On July 14, the union said its top leadership, including Cipriani and Jim Hoffa, the general president, plan to host a meeting of union officials from InBev breweries in Canada, Brazil and European countries to coordinate strategy. A few days earlier, the union wrote to InBev CEO Carlos Brito, asking to discuss the takeover and union jobs.
The current contract contains a promise to keep the U.S. breweries open. It includes "maintenance of health care benefits," a 14 percent increase in the workers' pension, a $1,000 early ratification bonus and annual pay raises. Anheuser-Busch pays union workers' health-care premiums and keeps the same level of health benefits as in the previous contract.
After reaching a tentative agreement in October 2003, Cipriani was quoted in the Post-Dispatch as saying the contract was "a Cadillac plan." It was "probably one of the best" Teamsters contracts "in at least the last several years," he said.
However, this contract goes against the trend of higher health-care premiums for workers.
The average premium for employee-only coverage rose to $52 a month in 2006 vs. $28 a month in 2000, says the Employee Benefit Research Institute (EBRI), a nonpartisan organization that analyzes health and benefits issues. Average family-coverage premiums rose to $248 a month in 2006 vs. $138 a month in 2000.
Fifteen years ago, workers paid an average of 20 percent of the premium for employee-only coverage, EBRI says. Last year, the average was 16 percent. The percentage paid by workers for family coverage has been between 26 percent and 28 percent since 1996.
The union has told members that an InBev takeover could lead to higher worker health-care costs, reduced health benefits "or decreases in future pensions." Traditional defined-benefit pensions, like the Teamsters plan, have been declining steadily as a percentage of private retirement programs because companies are emphasizing defined-contribution plans such as 401(k) programs, EBRI says.
The union also warns that retiree health benefits "could be a cost-cutting target." The U.S. Supreme Court recently refused to hear a case in which a federal appeals court said companies could cut or reduce health benefits to retirees when they become eligible for Medicare.
The appeals court decision upheld a ruling by the Equal Employment Opportunity Commission that was challenged by the American Association of Retired Persons. "Employer-provided retiree health benefits are critical for millions of older Americans because they usually are more extensive than the benefits provided by Medicare," says AARP.
In 2005, EBRI says, 12.7 percent of private-sector employers offered retiree health-care benefits, down from 21.6 percent in 1997.
Robert W. Steyer is a freelance journalist.