Sour Apples: Strike at Mott's Plant Underscores Disconnect in Corporate America, Union Says

May 26, 2010— -- As a labor negotiator, Stuart Appelbaum, president of the Retail, Wholesale, and Department Store Union International, has seen his share of financially-strapped companies trying to cut employees' wages and freeze benefits. He's understood it, and even agreed to some concessions.

But Appelbaum said he has never encountered a company that demanded wage cuts when its profits were up and its prospects promising.

So, earlier this year, when Dr Pepper Snapple Group, Inc., the food and beverage conglomerate, demanded that 305 workers at its Mott's subsidiary near Rochester, New York, accept a $1.50 per hour wage cut, Appelbaum and his fellow union members dug in their heels. DPS had just come off a year in which profits exceeded one-half billon dollars.

The Mott's plant workers, who belong to RWDSU Local 220 and earn around $20 an hour, went on strike early Monday, citing unfair bargaining practices.

DPS has begun hiring temporary workers to run the plant, the only one in the U.S. that still makes and packages Mott's apple sauce.

Chris Barnes, a spokesman for the Plano, Texas-based conglomerate, insisted that the company has negotiated in good faith over a contract that expired in mid-April, offering workers a compensation package in line with local industry norms.

"We offered to keep wages unchanged after three years of salary increases and, unfortunately, the union rejected this offer," Barnes said. "As a result, we have reached an impasse in negotiations and implemented new terms that reduce wages by $1.50 an hour. Under the implemented terms, their wages are still well above the average for manufacturing jobs in the Rochester area."

Striking workers aren't buying the rationale for the proposed slash in hourly pay, even in a fragile economy.

Considering the millions of dollars made by the parent company's executives and shareholders just in the past year as DPS's shares soared to all-time highs, the plant workers view their struggle as nothing less than a battle in defense of the American worker.

"When you get down to it, this situation is much bigger than just some unhappy workers at a Mott's apple juice plant in upstate New York," Appelbaum said. "This is about a large company doing extraordinarily well demonstrating outrageously greedy behavior. It's beyond outrageous. It's un-American."

Since being spun out of U.K. conglomerate Cadbury Schweppes two years ago at around $25 per share, DPS shares have risen to nearly $40, and have more than doubled off of March 2009 lows. Last year, the company, which produces 50 brands, including Mott's juice, namesake brands Dr Pepper and Snapple, as well as 7-Up, Hawaiian Punch, A&W root beer and others, recorded $555 million in profits on more than $1 billion in revenues. DPS's three highest paid executives, including CEO Larry Young, all saw their pay increase more than 100 percent in 2009 compared to pre-spinoff levels in 2007. Young actually endured a pay cut in 2009 compared to the prior year. He earned around $6.5 million in total compensation, down from around $8 million earned in 2008.

'Un-American'

According to a pay study done by the nonprofit United for a Fair Economy, the average CEO at a Fortune 500 American company earned around $11 million, or 364 times the pay of the average worker. A similar Economic Policy Institute study of historic CEO pay levels relative to the average worker found that in 1965 top executives earned 24 times as much as the average worker. By 1989 the ratio had increased to 71; it tripled to 300 in 2001.

"Executive pay is not relevant to discussions about hourly wages for bargaining unit employees," DPS's Barnes said. "Regardless, we strive to pay all employees a competitive wage or salary based on local market and industry norms."

"I don't begrudge a top executive making their millions, just not at my expense," said Roland Graham, a 38-year-old Mott's plant worker who earns $19.93 an hour operating the equipment that squeezes applesauce into individual serving cups, 72 cups to a case, 20,000 cases a day. He's worked at the plant for nearly a decade. "This isn't about pay," he said. "The strike, in my own opinion, is more about the way the company treated us during the negotiating period – pretty poorly."

From the start, RWDSU union organizer Peter Montalbano explained, DPS management tried to intimidate workers, going so far as banning union emblems in the plant. The home office made it clear that its last, best and final offer was the $1.50 an hour pay cut as well as a freeze on pension benefits, and that it was not going to budge. Even coming off of an impressively profitable year, even by demanding Wall Street standards, and especially so relative to 2008 when the then newly spun off company suffered losses, DPS was set on getting the Mott's workers to accept lower wages, Montalbano said. Specifically, the conglomerate sought to get the Mott's workers in line with what similar factory workers in Western New York earned per hour, he said.

According to a U.S. Bureau of Labor Statistics National Compensation Survey conducted in 2009, the average wage in the Rochester area for a production, transportation and material moving position was just over $14 an hour.

"Their rationale was that with so much unemployment in this area they could force workers to accept a cut in wages," Montalbano said. "Management didn't try to hide this point of view."

Unions across the country have generally seen membership dwindle, and unions have been blamed for making auto companies uncompetitive and breaking government budgets. It's unclear whether the type of pro-union campaign that hurt Coor's beer a generation ago, when the brewer was labelled anti-union, would play out the same today. But no matter what happens in the arbitration panel of public opinion, the Mott's workers and their union have vowed to see this strike through until the end.

Unions Have Seen Better Days

"Let them hire temps," Graham said. "We're 100 percent committed to this labor action. And hopefully a strong enough message gets sent so we can get back to the bargaining table."

"It's no secret that employers of all types and sizes have faced rising compensation-related costs," Barnes said. "We have to manage our costs the same as everyone else and ensure that they remain sustainable over the long term."