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Meatpackers Battle for Survival : Firms Squeeze Labor Costs Hard in Effort to Ride Out Lengthy Slump

April 27, 1986|JAMES RISEN | Times Staff Writer

PERRY, Iowa — The scene is depressingly familiar. Another rural hamlet tucked deep in the nation's heartland is being held hostage by a fractious labor dispute in the meatpacking industry.

Hundreds of union workers from the area's largest employer have been thrown off the job, and no one knows when--or if--they will go back into the big hog slaughtering plant that sits empty near the edge of town.

But this time the scene is not in Austin, Minn., home of the highly publicized and seemingly endless strike against Geo. A. Hormel & Co. It is here in Perry, a town of 7,000 about 40 miles northwest of Des Moines, where Oscar Mayer Foods Corp. shut down its slaughtering plant on April 4--two days before its labor contract was set to expire. Oscar Mayer had decided it would rather lay off its 650 workers than risk a strike.

The company, which said Friday that it will close the plant permanently May 9 unless workers agree to its contract terms, has thus become just the latest meatpacker to play hardball with its union in an effort to squeeze out labor costs and survive the industry's long slump.

"We're not interested in negotiating," C. David Harkness, manager of Oscar Mayer's Perry plant, warned last Monday.

In fact, while Hormel's militant and sometimes violent strikers have grabbed all the headlines by struggling through a mini-civil war in their eight-month battle, thousands of meatpacking workers in dozens of other towns like Perry have quietly come under just as much pressure from industry management to grant huge wage concessions or face unemployment.

Wages throughout the meatpacking industry are just now beginning to recover from a virtual free-fall--one that couldn't be stopped by union leaders and one that cost workers from 20% to 40% of their pay over the last three years.

Far from being just isolated incidents, the long walkout at Hormel's Austin plant as well as the more recent dispute in Perry, are really part of a much larger confrontation between management and labor throughout the meatpacking industry.

It's a struggle that began when the nation's pork producers entered into a period of wrenching restructuring in the early 1980s. A sharp drop in pork consumption, which led to a huge glut in production capacity, sparked the battle in Austin as well as the plant closing here in Perry.

Those same industry conditions have also burdened the rest of the meatpacking business with one of the most turbulent--and rancorous--labor climates of any industry in the country.

"These employers will use anything to their advantage to keep wage rates down," says John Mancuso, a top official in the packinghouse division of the United Food and Commercial Workers union. "They're a real bunch of cut-throat operations. They'll cut each other's throats just as easily as they'll cut the workers' throats, because it is such a competitive industry." On that last point, there is rare agreement between management and labor. "I think the industry has been forced to be tough on labor because of the economics," concedes Oscar Mayer's Harkness.

Meatpackers, and especially companies such as Oscar Mayer and Hormel that slaughter hogs and process pork, have been faced with many of the same problems that firms in other commodity industries have confronted in the low-inflation 1980s--a surplus of production capacity at a time of sluggish demand and depressed prices.

Those trends have been worsened by the long slide in per-capita pork consumption, which has declined from 73.5 pounds a year in 1980 to 66 pounds annually last year. Americans worried about cancer and heart disease are simply eating less pork and more fish and poultry.

At the same time, a number of major new competitors, including IBP Inc., the Occidental Petroleum unit which virtually took over the beef end of the meatpacking business in the 1970s, have been moving into pork despite the capacity glut, with low-wage operations that can outproduce and underprice the traditional, heavily unionized producers in hog slaughtering.

Able to Respond

Meanwhile, farmers, who aren't burdened with heavy fixed costs in plant and equipment and so are able to respond to market conditions more quickly than meatpackers, have cut back on the number of hogs they are raising because of lower prices.

American hog production dropped from 97.2 million in 1980 to 84.5 million in 1985; as a result, more and more slaughtering operations are now chasing fewer and fewer hogs.

"As an industry, we haven't been able to shut down enough capacity yet to match the drop in hog production," observes Bob Brown, an economist with Oklahoma City-based Wilson Foods Corp., which was the nation's biggest hog slaughterer until it entered Chapter 11 bankruptcy protection proceedings in 1983.

"There is a long list of plants that have closed, but the people in the business that stay open keep improving their productivity, and that increases real capacity even though we have fewer facilities."

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