Cat Purrs

End of the longest strike

The beaming workers pouring through the gates at Caterpillar Tractor's East Peoria plant were obviously happy to be back on the job after the longest company-wide strike in United Auto Workers history. But they were not a bit pleased about what the walkout had cost them. Art Borowiec, 43, an electrician, figures he lost nearly $20,000 in wages and benefits during the 205-day strike, and like many of his coworkers, he doubts that the results were worth it. Says he: "I've never been so broke, desperate or dependent. I'd like to have stayed out longer, but I just couldn't afford it."

The new contract includes concessions by Caterpillar (1982 sales: $6.5 billion) as well as by the strike-weary workers, who voted 2 to 1 to accept it even after union leaders had recommended its rejection. While the company won its demand for a 37-month wage freeze, it also agreed to some pay increases. These include Caterpillar's first profit-sharing bonuses, which will bring the average worker a total of $558 in cash or company stock by 1985, plus quarterly cost of living adjustments. The hourly pay of union members consisted typically of $12.80 in wages and $6.74 in benefits before the strike.

Caterpillar executives hope the wage freeze will help to revive profits. The ailing maker of earthmoving and construction equipment was $180 million in the red last year, its first yearly loss since 1932. It lost $172 million more in this year's first quarter. The firm laid off some 20,000 workers during 1982 in addition to the 20,400 strikers, and has slashed its capital spending and research budgets. "Cost containment is vital," says Chairman Lee Morgan, 63. "We will have to scratch still harder for business and manage more effectively."

The cost-cutting should aid Caterpillar in its battle with Japan's Komatsu (1982 sales: $3.4 billion), which is challenging the company's dominance of the earthmoving-equipment market. Having watched Detroit carmakers lose ground to Japanese imports, Caterpillar was determined not to undergo that experience. Said one executive: "The market is more competitive than ever, and we had to get tough."

The fast-growing Komatsu firm can undersell Caterpillar because its total pay averages only about $11 an hour. The low value of the yen also helps keep down the price of its exports. Although Komatsu has so far won less than 7% of the U.S. market, as against some 50% for Caterpillar, it has been gaining rapidly in the Middle East and Southeast Asia.

Caterpillar is coming out of the strike in a relatively strong position. The recession actually helped the firm by checking demand for construction equipment, thus keeping Komatsu and others from walking off with the business. Meanwhile, Caterpillar dealers have slashed their inventories by selling at discounts of up to 30%, and many are now ready to reorder.

Caterpillar plans to shore up its finances by a new stock issue. The company, which borrowed more than $800 billion at high rates over the past twelve months, said last week that it intends to sell 5 million shares in May and invest the proceeds in new plant and equipment. Caterpillar stock had been rising despite the strike and closed last week at 46½.