National | Business

Issue: "Bush: Holding the line," June 5, 2004

A safe way?

Safeway Inc. chairman Steve Burd fended off shareholder threats to bounce him from his job, but he still faces questions about whether reducing employee wages will do more harm than good.

In three years, two-thirds of the company's market value has evaporated as supermarket takeovers in Illinois and Texas have soured and labor tensions have mounted. In southern California, a 45-month strike cost the company $225 million.

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Mr. Burd expects Safeway to snap out of its slump by providing "world-class" customer service to distinguish itself from Wal-Mart and other discounters that rely on nonunion workers. That task is difficult with Safeway spending an average of $8.59 per hour more on employee wages and benefits than its nonunion competition.

"If we don't solve this cost problem and get our costs lower, we don't have a business," he said. Skeptics question how Safeway can improve customer service while simultaneously offering less attractive wages and benefits to future workers.

Failure to communicate

More than 100,000 union workers in 13 states ended their planned four-day strike against SBC Communications Inc. last week with a new five-year agreement that provides wage increases and greater job security.

The company, which has seen revenues decline for 10 consecutive quarters, had proposed a hike in healthcare premiums. The Communications Workers of America balked and demanded access to jobs in areas where nonunion contract workers, some of whom earn much lower wages in India and the Philippines, handle internet support and wireless data service.

The new agreement guarantees no layoffs of employees currently on the payroll for the next five years and calls for the rehiring of several hundred workers who had been laid off.

In addition, SBC will continue to provide fully paid health benefits although some increases in co-payments for medical services and prescription drugs were agreed upon.

During the strike, 40,000 SBC managers, contract workers, and retirees filled the roles of telephone operators, clerical workers, linemen, and service representatives. Many were asked to work 12-hour shifts.

Balance Sheet

Machinists and aerospace workers for Boeing's defense unit avoided a strike by approving a new three-year deal under which Boeing will not provide health coverage during retirement for anyone hired in 2005 or later.

Personal bankruptcies rose 2.8 percent in the 12 months ending March 31, continuing the upward trend of recent years but marking a more moderate increase than in earlier months. Heavy consumer spending in the 1990s and the historically low interest rates of the past few years encouraged borrowing and built up heavy household debt.

President Bush used his weekly radio broadcast to point out that "America's jobs engine is running strong" in key election states. "Nationally, we gained 288,000 new jobs in April, and the nation has added more than 1.1 million new jobs since last August," he said. Nationwide, the unemployment rate has dropped to 5.6 percent from 6.3 percent last June.

Mitsubishi Motors Corp. will cut 11,000 jobs, nearly a quarter of its global work force, and get a $4 billion infusion under a revival plan its chief executive described as its "last chance." The Japanese automaker is racking up deep losses and debt amid plunging sales as it struggles to restore its credibility after recurring recall cover-ups.


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