Stores, Workers Still Feel Sting of Supermarket Labor Fight
By James F. Peltz and Melinda Fulmer
Times Staff Writers

December 15, 2004

Nearly 10 months after the end of the bitter Southern California grocery strike and lockout, the three chains and the union that waged the longest labor standoff in U.S. supermarket history are still in turmoil.

Profits at Albertsons Inc., Safeway Inc.'s Vons and Pavilions stores and Kroger Co.'s Ralphs are being pinched by the price cuts they've made to woo shoppers alienated by the 4 1/2-month-long dispute. The stocks of all three companies' stocks have fallen since a new contract was signed in February.

The supermarkets maintain that they'll rebound, largely because the contract installed a two-tier system allowing them to give new hires significantly lower wages and benefits than veteran workers.

Safeway, for one, doesn't want to wait for attrition to realize the payoff. The company, based in Pleasanton, Calif., plans to offer voluntary buyouts to roughly one-third of the 22,000 people who worked at 293 Vons and Pavilions stores in Southern and Central California to hasten their replacement with less-costly new hires.

People familiar with the buyout program said Safeway was prepared to spend up to $50 million on it, so if 1,000 workers accepted, they would receive $50,000 each.

"They want to get rid of the old-timers and bring in a new class of citizens," said Rick Icaza, president of the International Food and Commercial Workers Local 770, which represents 4,266 Vons and Pavilions employees in Los Angeles.

As it is, the two-tier system is breeding division between experienced workers and new hires who aren't happy about being paid less to perform the same tasks. Turnover among new hires is unusually high, union officials said, and some new employees are chafing at paying union dues that average nearly $50 a month. The grocery stores dispute that there is a turnover problem.

For their part, long-time supermarket union members say the old esprit de corps on the job is gone."It hasn't been the same here since the strike," said Marguerite, a Vons checker who, like other workers interviewed recently, declined to give her last name. "People's attitudes have changed about their jobs. There's just not the same kind of loyalty."

Shoppers said that once-favorite stores seem unfamiliar. "You get used to people and then they're gone," said John Burt, a retired building inspector, outside a Glendale, Calif., Vons that he has patronized for decades. "It's a completely different outfit."

The Safeway buyout plan -- and the knowledge that the company's goal is to thin the list of experienced, higher-paid workers -- is likely to hurt morale even more, employees said.

So far, Ralphs and Albertsons haven't proposed buyout programs, union officials said. Ralphs spokesman Terry O'Neil said the chain "has no plans" to do so. Albertsons didn't respond to calls for comment.

Financial analyst Andrew Wolf of BB&T Capital Markets in Richmond, Va., said Albertsons and Ralphs might end up following Safeway's lead. "From a profit perspective, it makes a lot of sense," he said.

Under the contract, a new cashier earns $8.90 an hour, tops out after six years at $15.10 an hour, and must wait one year before becoming eligible for health benefits. A cashier hired under the previous contract, which expired in October 2003, started at $9.78 an hour and was immediately eligible for health benefits; a veteran cashier's hourly wage is $17.90 and is reached in about two years.

The Safeway buyout plan is being negotiated with the union and spokesman Brian Dowling declined to disclose possible terms.

Buyouts or early retirement programs are common in Corporate America as companies trim payroll costs. Safeway already has offered buyouts elsewhere in the country. "It's a very common tool for managing labor costs in retail and other industries," Dowling said.

Because the program would be voluntary, it's anyone's guess how many workers would actually accept, but the sources said the anticipation was that between 750 and 1,150 would participate.

During the strike, the union said its members' annual incomes averaged less than $30,000 a year. But some experienced employees could earn considerably more, and overall the Southern California grocery workers had been among the best-paid in the United States.

Safeway's incentive is easy to understand, said Mark Husson, an analyst at HSBC Securities in New York. Citing data provided by the chain, he said that departing Vons employees earn an average $16.08 an hour -- while new employees average $10.43. The stores' contributions to new workers' healthcare benefits also are considerably lower.

"About 75 percent of the future savings that Safeway will get from the new contract come from (hiring) new employees," a key cost savings when Safeway is struggling to boost its profits, Husson said.

The labor dispute began Oct. 11, 2003, when the UFCW struck Vons and Pavilions. Ralphs and Albertsons, who were jointly negotiating with Safeway, then locked out their union members. About 59,000 workers were idled at 852 supermarkets from Bakersfield to San Diego.

Throughout the labor negotiations, the stores insisted they had to slash their labor costs to compete with non-union, lower-cost mass-merchandisers, notably Wal-Mart Stores Inc., that are aggressively expanding their grocery operations.

The impasse dragged on for months, badly damaging both sides. The stores lost an estimated $1.5 billion in sales as many shoppers took their business elsewhere. Union members struggled with dwindling strike pay, and many had to take part-time jobs or simply quit the grocery business.

Although the three chains have seen their sales recently near pre-strike levels, the promotional costs to drive the extra traffic trimmed their profits, offsetting much of the labor savings from the new contract.

Staff writer Melinda Fulmer contributed to this story.

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