“A walkout ends, and strikers find a changed world - WJLA” plus 4 more

A walkout ends, and strikers find a changed world - WJLA
After battle for a trumpet factory, workers come back to economy gone ... - The San Francisco Examiner
Retirement Dreams Under Siege - Free Internet Press
Luke’s Mobil ditches gas - Adirondack Daily Enterprise
'Slow and steady wins the race,' says machine shop owner - Daily Territorial

A walkout ends, and strikers find a changed world - WJLA

Posted: 17 Oct 2009 02:37 PM PDT

ELKHART, Ind. - By 10:30 a.m., the lot at Disabled American Veterans Post 19 is nearly full, and a table spread with potato salad and Port-a-Pit chicken beckons. The only thing missing is a banner, mutters one of the workers inside the rental hall to another: "Welcome to Our Last Supper."

This is a gathering to mark the end of a 40-month fight over who owns the craftsmanship that gives life to a factory floor. These men and women logged decades pressing, soldering and buffing - making trombones and trumpets of such sinuous precision they are called the Stradivarius of brass.

In the end, though, there is no music.

"Lord God, you know what the plan is for our lives," Bertha Carpenter prays as fellow workers bow their heads. "And let us be ever grateful."

This is the story of a decision - of 234 workers, one company and countless consequences.

Back when times were good, many Americans made decisions that seemed like sure things. Millions of families gambled their homes, betting prices could only go up. Others bet their retirement security, banking on the stock market.

But workers at the Vincent Bach factory bet on what seemed like much more modest expectations. When they walked out on strike, they had no get-rich-quick illusions. At best, the thinking went, if they stuck together they'd keep hold of their prized rung on the economic ladder.

They bet their jobs on it.

Today that bet is being called. But like Rip Van Winkle, who fell asleep for 20 years and came back to a place he barely recognized, the men and women of Bach return to a vastly different landscape than the one they left behind.

And from here, there is no going back.

---

There's a good chance you've heard of Elkhart. Over the last year, the city of 52,000 along the St. Joseph River gained notoriety even the most desperate chamber official would never have dreamed up: It became a poster child for the recession.

Millions across the country lost jobs, but Elkhart was slammed by the nation's largest jump in unemployment. By this spring, one in five workers were out of a paycheck. Many of the factories that made it the capital of recreational vehicle manufacturing shut down. Twice during his campaign and twice since, Barack Obama (web | news | bio) came to Elkhart County to spotlight the nation's economic despair.

But this story begins in a very different Elkhart, one that can be hard to remember.

Back in 2006, that Elkhart was singled out by a Federal Reserve economist as one of the Midwest's "jewels in the rust." Unemployment hovered just above 4 percent. The RV plants were hiring and the money was good.

Times were so good, Stacy Curtis recalls, that you couldn't walk into a restaurant on a Friday night and not expect to wait half an hour for a table. The Elkhart Truth printed columns of want ads.

But on the floor of the Bach factory there was little, if any, talk of going elsewhere for a paycheck.

Bach, a squat cinderblock building set back from Industrial Parkway's elbow-shaped bend, looked like just another factory. But two things made it a special place to work - the interlocking relationships of the people inside and the nearly timeless craft they practiced.

The place was like a big family, workers say, and it's no exaggeration.

Stacy Curtis followed her dad in to Bach, where she met husband, Steve, one of the buffers blanketed in red dust her father supervised. Brad Milliken hired in as a janitor and night watchman at 17 when his dad put the good word in, then did the same for younger brother, John, after he got a promotion.

Job openings at Bach were guarded like secrets, not least because of the pay. In a town where 45 percent of all jobs were in factories, Bach paid near the top. By 2006, the average worker made $21 an hour.

But the family sensibility went beyond the paychecks.

On Fridays, workers circled around covered-dish lunches on the shop floor. On birthdays, they serenaded each other on whatever instrument was within reach. They took up collections for retiring workers, who were presented with bud vases made from a trombone mouthpiece.

Bach was equally bound by pride. Others factories could build cars or computers to spec. But how many of those workers could call themselves craftsmen?

In the music world, Vincent Bach is synonymous with cornets, trombones and, especially, trumpets. Bach made horns for all wallets, but the showpieces were its Stradivarius trumpets: gleaming, curvaceous beauties commanding $2,500 or more from orchestral professionals.

"Once you got done with an instrument," Jeff Hoogenboom says, "it was like a jewel."

That pride reached back to the 1920s when the original Bach, an Austrian immigrant, set up shop in New York. He was so certain of his trumpets' superiority he named them for the world's most legendary instrument.

"The Stradivarius Model C trumpet is the finest C trumpet ever produced," Bach's first catalog boasted in 1926. It "has a bright brilliant tone which strikes through the fortissimo playing orchestra like lightning through the dark sky."

Bach sold his company in 1961. The new owner moved it to Elkhart, the center of the trumpet and tuba trade long before it became the RV capital. By the 1970s, Elkhart factories supplied 40 percent of the world's band instruments.

At the new plant, work went on much as it always had - sheets of brass pressed one at a time, bells shaped on mandrills inherited from Bach himself.

But the company and the world around it began to change.

In 1993, two investment bankers who'd previously worked for junk bond king Michael Milken acquired Bach's parent firm in a leveraged buyout. Two years later, they bought famed piano maker Steinway & Sons and merged the businesses under the Steinway name, creating the nation's largest musical instrument manufacturer.

The new owners pushed to speed production. They eliminated the plant's saxophone line, cutting the union work force from 450 to 234. The company was making money, earning $13.8 million in 2005. But executives were wary of Chinese producers, whose $200 trumpets targeted the large student market.

The message was clear in "town meetings" president John Stoner called on one of the plant's loading docks: Change was not a choice. Stoner infuriated some workers, worker Dave Barany says, telling them: "We have the equipment. We own your skills."

The company would not comment for this story, but its demands were clear. On the final day of their contract in March 2006, every worker returned home to find a letter from Stoner.

Bach was losing money on its student instruments. An Asian manufacturer was offering to take over for a fraction of the cost.

"This opportunity for dramatic savings has created a dilemma - for me personally and the Company," Stoner wrote. "If we outsource the student line instruments, it will only be a matter of time before the step up and pro lines are similarly affected. So while I would prefer to keep work and jobs at Bach, we cannot and will not do so if it means we produce instruments at a loss."

The company demanded cuts that would drop average pay $6 an hour. Workers would pay more for health insurance and overtime would be mandatory, a requirement some called a "family killer."

On a Saturday morning - April 1, 2006 - workers gathered to respond.

"We hollered and hollered and said, 'Hell, yeah,'" Stacy Curtis says.

The vote was 185-37. The strike was on.

---

The first night on the picket line an icy wind whipped down Industrial Parkway. Strikers huddled around burn barrels. But the mood was upbeat and more than a little ornery.

In a shop where even the youngest had 10 or 15 years in, most recalled the only other recent strike - a walkout in the early 1990s that lasted just eight days. Back then, Stacy Curtis' dad, a supervisor who remained in the plant, would open the door and wave to her on the picket line.

This time would be different, they knew. Friends in management had warned workers to be prepared, to salt away their cash.

"We know exactly where the pressure points are on the union. They know where they are on us," Steinway CEO Dana Messina told Wall Street analysts soon after the strike began.

Many jobs in the plant took months to learn and left supervisors struggling. Without them, workers joked, the company would be reduced to selling inferior "musically shaped objects." If the company didn't value them, they'd take their skills somewhere else.

"We were craftsmen," says Jerry Stayton, then the president of United Auto Workers Local 364, which represented the workers.

Some workers thought the strike might end in as little as two weeks.

"If we're out here two months, I'll be surprised," Stacy Curtis told herself.

A few days after the strike began, the company flag went missing from atop the pole and a Chinese flag flapped in its place. The company dialed the police - the first of 314 times they'd be called in.

But police would not resolve the strike. Workers built plywood sheds along the right of way. They rotated in for picket duty around the clock, bringing along children in their pickups, gathering around TVs powered off generators, holding fish fries.

After 32 years at the plant, John Milliken felt almost giddy. Now the trumpet assembler had mornings to savor breakfast with his wife and daughter. He joked with his brother on the picket line. Co-workers kidded him when he showed up on a bike. But Milliken marveled at the smell of the lilacs along the route and the weight he was taking off from the exercise.

In early June, negotiators came back with an offer including buyouts, but it was rejected by all but four workers.

Ten days later, the company announced it was hiring replacements. A fight broke out between strikers and a car full of men come to claim their jobs. Stacy Curtis had a friend teach her to swear in Spanish so she could yell in two languages at replacements headed in to the plant.

Then, with tensions rising, the two sides grasped at compromise - one many workers now say was probably the best chance to end the strike. The offer called for workers to return at wages capped at $21 an hour, along with pricier insurance and mandatory overtime.

"We should accept this and live to fight another day," Stayton, the union president, told workers from a microphone at the front of the DAV hall.

The sticking point was the workers who had taken their place. Company negotiators said they'd be let go, but few believed them.

"Get it in writing! Get it in writing!" strikers shouted. A few minutes later, they voted the contract down. Midway through it's fifth month, the strike was no closer to resolution than the day it had begun.

---

Criticism of the strike was growing and it wasn't confined to the letters to the editor in the paper.

It was hard enough for Stacy Curtis to talk about the strike with her father, the career nonunion manager. But the couple hadn't expected it would be so difficult to justify it to their son, an Army recruiter, and their daughter in the Air Force.

"The girl just asked me today, 'Why are you all still talking about this?'" Stacy says. "I said 'Stephanie, you just don't understand.'"

It wasn't any easier for Tim Heminger, an instrument assembler with more than 18 years at the plant. Heminger, who drove in from a conservative Michigan farming community, was caught off guard when his minister began lectured him on the wrongness of the union.

"My blood pressure rose up," Heminger says. "I finally said you know we need to change the subject or I'm going to say something I'm going to regret saying."

At weekly meetings, the union handed out $200 strike pay checks. It also picked up workers' health insurance - a critical safety net on Labor Day when Steve Curtis' heart gave out on the picket line.

But for workers who'd expected the walkout to last weeks, money was growing tight.

Stayton, who'd long worked a second job, took on more hours at Star Tire, fueling criticism from fellow strikers that he wasn't giving enough time to leading the local. In January, Brad Milliken found a job sweeping floors at a cargo trailer factory.

But the place was dirty and the work was hard. Brad was a good 20 years older than most other workers. Some called him the "retiree" - sticking an expletive in front to make clear they meant no respect. The strike was a year old and John Milliken could see his brother was unhappy. He had no idea.

On April 10, the brothers - longtime fans of Notre Dame women's basketball - joined a crowd of 400 for the team's annual banquet and took their seats. Brad turned to John.

"I don't want to make you get sick here," he said.

John looked at his brother, confused, waiting for an explanation.

"I'm going back in," Brad said.

Brad Milliken was hardly the first. For months a small but steady trickle of workers had been crossing the picket line and returning to their jobs, winning scorn from strikers left behind. Milliken was "Scab No. 37."

John understood Brad's reasons. He still loved his brother. But that didn't make the decision easy to stomach. Brad had long enjoyed a friendship with Stoner, the company president. The younger Milliken, though, was increasingly furious at management for ruining the plant and the lives of its workers. "Thugs," he called them. He'd never go back.

Brad returned to find parts for 1,200 Stradivarius trumpets stacked up, waiting to be assembled.

Meanwhile, at the Curtis house, Stacy and Steve examined their expenses. NASCAR (web | news) tickets would have to go. So would vacations and dinners out. They canceled rental of their weekend spot on a Michigan lake, sold the golf cart and the camper.

"The running joke was that we were all going to live in strike sheds," Stacy Curtis says.

Thanks to a judge's injunction, workers were restricted in the numbers they could deploy to the picket lines. The strike settled into a holding pattern. The peace didn't last.

Replacement workers called the National Labor Relations Board. With the strike entering its 19th month, a vote was set on whether the union would continue to represent plant workers. But the calculus had shifted.

Strikers lined up to vote. But so did replacement workers, inside the plant. When some strikers reached the table they were told their vote might not count because their jobs had been taken.

Workers' anger was also finding another target - the union itself, which they blamed for poor representation and counsel.

At the same time, the company was learning to live without the strikers. Steve Curtis found work at E.K. Blessing Co.- one of a handful of instrument makers left in town - then discovered his new employer had a contract from Bach to make trumpets. He was assigned to other work, but it left him uncomfortable.

Then again, at least he had a job.

---

Early on, work after Bach was relatively easy to come by. But by the summer of 2008, Elkhart's strength - the RV factories - was turning in to a painful weakness.

Families had once road-tripped to Elkhart to choose a customized home on wheels. But the recession was taking hold and as consumers cut back, they crossed RVs off their lists. Lenders cut credit to manufacturers. Dealers slashed orders. Plant after plant - Odyssey Group, Pilgrim International, Monaco Coach - sent workers home and shut down lines.

In months, unemployment doubled. By this spring, the area jobless rate reached 18.9 percent. Within Elkhart, it neared 21 percent.

John Milliken was certain: The strike was long beyond resolving. When he got an offer to be a custodian at Northridge High School, he was grateful. At $13 an hour, it paid much less than Bach. But benefits were generous. After the plant's swelter, the school's air conditioning was wonderful. For the first time in years, he felt like the people he worked for accorded him respect.

Steve Curtis, laid off from another horn maker, grabbed a friend's offer for 20 hours a week in his instrument repair shop.

But the odd jobs that had kept third-generation bellmaker Steve Kiefer afloat vanished. When his 1988 pickup broke down, he couldn't afford to fix it. He fell behind on his mortgage and began thinking it might be better to let the bank have the place.

On the strike's third anniversary, workers gathered at the pavilion in Elkhart's McNaughton Park. Too much time had passed for a rally. They called it a reunion. But between the speeches, talk at the tables was full of apprehension.

The battle would be decided by the vote. After months of lawyers' arguments, federal inspectors tallied up ballots - 113 to get rid of the union, 107 to keep it. But eight ballots - enough to swing it either way - were still contested and uncounted.

On Monday, Aug. 4, strikers were back on the picket line when cell phones began to ring. The ruling was in. The ballots of two strikers - James Klein and William Seigler - would not be counted because they had been replaced.

After three years, four months and four days, there was nowhere to go but home.

"It's over," Stacy Curtis told Steve when she found him at work. "It's over."

---

Before the last meal is served, buffers and bellmakers cluster anxiously around a health insurance salesman's table in one corner of the Veteran's hall. Workers with gray hair pull chairs alongside one another and concede they were only a few years from retirement anyway.

But for workers in their 40s and 50s, it's not nearly so clear.

A few call Brad Milliken: "Hey, can you get me in?" Even that wouldn't turn back the clock. Two weeks after the strike ended, managers summoned workers who crossed the line and cut their pay. Brad, who made $24.50 an hour before the strike, is down to $17.

Others see their best chance beyond Elkhart. Deneen Stout, just divorced and with a new associate's degree, figures she'll move away and find a job as a medical assistant.

"Don't put any dates or years on your resume," she counsels former co-worker Chuck Miller. "That way they can't date you. I learned that in college."

By noon, workers are filtering out, carrying leftover chicken in foam boxes. But Stacy Curtis is not quite ready to call it over.

She points her pickup back down Industrial Parkway for the first time in weeks. In front of the Bach plant, she passes the one remaining testament to the past three years - a light blue mailbox strikers put up when the picket line became a second home - and slows to tally all the empty parking spaces.

But now she's seen enough. She gives the F-150 a little gas. Down the street, she's heard, a warehouse is getting ready to open. Maybe they need a worker with experience. She might as well ask.

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After battle for a trumpet factory, workers come back to economy gone ... - The San Francisco Examiner

Posted: 17 Oct 2009 11:45 AM PDT

ELKHART, IND. — By 10:30 a.m., the lot at Disabled American Veterans Post 19 is nearly full, and a table spread with potato salad and Port-a-Pit chicken beckons.

The only thing missing is a banner, mutters one of the workers inside the rental hall to another: "Welcome to Our Last Supper."

This is a gathering to mark the end of a 40-month fight over who owns the craftsmanship that gives life to a factory floor. These men and women logged decades pressing, soldering and buffing — making trombones and trumpets of such sinuous precision they are called the Stradivarius of brass.

In the end, though, there is no music.

"Lord God, you know what the plan is for our lives," Bertha Carpenter prays as fellow workers bow their heads. "And let us be ever grateful."

This is the story of a decision — of 234 workers, one company and countless consequences.

Back when times were good, many Americans made decisions that seemed like sure things. Millions of families gambled their homes, betting prices could only go up. Others bet their retirement security, banking on the stock market.

But workers at the Vincent Bach factory bet on what seemed like much more modest expectations. When they walked out on strike, they had no get-rich-quick illusions. At best, the thinking went, if they stuck together they'd keep hold of their prized rung on the economic ladder.

They bet their jobs on it.

Today that bet is being called. But like Rip Van Winkle, who fell asleep for 20 years and came back to a place he barely recognized, the men and women of Bach return to a vastly different landscape than the one they left behind.

And from here, there is no going back.

___

There's a good chance you've heard of Elkhart. Over the last year, the city of 52,000 along the St. Joseph River gained notoriety even the most desperate chamber official would never have dreamed up: It became a poster child for the recession.

Millions across the country lost jobs, but Elkhart was slammed by the nation's largest jump in unemployment. By this spring, one in five workers were out of a paycheck. Many of the factories that made it the capital of recreational vehicle manufacturing shut down. Twice during his campaign and twice since, Barack Obama came to Elkhart County to spotlight the nation's economic despair.

But this story begins in a very different Elkhart, one that can be hard to remember.

Times were so good, Stacy Curtis recalls, that you couldn't walk into a restaurant on a Friday night and not expect to wait half an hour for a table. The Elkhart Truth printed columns of want ads.

But on the floor of the Bach factory there was little, if any, talk of going elsewhere for a paycheck.

Bach, a squat cinderblock building set back from Industrial Parkway's elbow-shaped bend, looked like just another factory. But two things made it a special place to work — the interlocking relationships of the people inside and the nearly timeless craft they practiced.

The place was like a big family, workers say, and it's no exaggeration.

But the family sensibility went beyond the paychecks.

Bach was equally bound by pride. Others factories could build cars or computers to spec. But how many of those workers could call themselves craftsmen?

"Once you got done with an instrument," Jeff Hoogenboom says, "it was like a jewel."

At the new plant, work went on much as it always had — sheets of brass pressed one at a time, bells shaped on mandrills inherited from Bach himself.

But the company and the world around it began to change.

The company would not comment for this story, but its demands were clear. On the final day of their contract in March 2006, every worker returned home to find a letter from Stoner.

Bach was losing money on its student instruments. An Asian manufacturer was offering to take over for a fraction of the cost.

"This opportunity for dramatic savings has created a dilemma — for me personally and the Company," Stoner wrote. "If we outsource the student line instruments, it will only be a matter of time before the step up and pro lines are similarly affected. So while I would prefer to keep work and jobs at Bach, we cannot and will not do so if it means we produce instruments at a loss."

The company demanded cuts that would drop average pay $6 an hour. Workers would pay more for health insurance and overtime would be mandatory, a requirement some called a "family killer."

On a Saturday morning — April 1, 2006 — workers gathered to respond.

"We hollered and hollered and said, 'Hell, yeah,'" Stacy Curtis says.

The vote was 185-37. The strike was on.

___

The first night on the picket line an icy wind whipped down Industrial Parkway. Strikers huddled around burn barrels. But the mood was upbeat and more than a little ornery.

In a shop where even the youngest had 10 or 15 years in, most recalled the only other recent strike — a walkout in the early 1990s that lasted just eight days. Back then, Stacy Curtis' dad, a supervisor who remained in the plant, would open the door and wave to her on the picket line.

This time would be different, they knew. Friends in management had warned workers to be prepared, to salt away their cash.

"We know exactly where the pressure points are on the union. They know where they are on us," Steinway CEO Dana Messina told Wall Street analysts soon after the strike began.

"We were craftsmen," says Jerry Stayton, then the president of United Auto Workers Local 364, which represented the workers.

Some workers thought the strike might end in as little as two weeks.

"If we're out here two months, I'll be surprised," Stacy Curtis told herself.

A few days after the strike began, the company flag went missing from atop the pole and a Chinese flag flapped in its place. The company dialed the police — the first of 314 times they'd be called in.

In early June, negotiators came back with an offer including buyouts, but it was rejected by all but four workers.

Then, with tensions rising, the two sides grasped at compromise — one many workers now say was probably the best chance to end the strike. The offer called for workers to return at wages capped at $21 an hour, along with pricier insurance and mandatory overtime.

"We should accept this and live to fight another day," Stayton, the union president, told workers from a microphone at the front of the DAV hall.

The sticking point was the workers who had taken their place. Company negotiators said they'd be let go, but few believed them.

___

Criticism of the strike was growing and it wasn't confined to the letters to the editor in the paper.

"The girl just asked me today, `Why are you all still talking about this?'" Stacy says. "I said `Stephanie, you just don't understand.'"

"My blood pressure rose up," Heminger says. "I finally said you know we need to change the subject or I'm going to say something I'm going to regret saying."

At weekly meetings, the union handed out $200 strike pay checks. It also picked up workers' health insurance — a critical safety net on Labor Day when Steve Curtis' heart gave out on the picket line.

But for workers who'd expected the walkout to last weeks, money was growing tight.

But the place was dirty and the work was hard. Brad was a good 20 years older than most other workers. Some called him the "retiree" — sticking an expletive in front to make clear they meant no respect. The strike was a year old and John Milliken could see his brother was unhappy. He had no idea.

On April 10, the brothers — longtime fans of Notre Dame women's basketball — joined a crowd of 400 for the team's annual banquet and took their seats. Brad turned to John.

"I don't want to make you get sick here," he said.

John looked at his brother, confused, waiting for an explanation.

"I'm going back in," Brad said.

Brad returned to find parts for 1,200 Stradivarius trumpets stacked up, waiting to be assembled.

Meanwhile, at the Curtis house, Stacy and Steve examined their expenses. NASCAR tickets would have to go. So would vacations and dinners out. They canceled rental of their weekend spot on a Michigan lake, sold the golf cart and the camper.

"The running joke was that we were all going to live in strike sheds," Stacy Curtis says.

Thanks to a judge's injunction, workers were restricted in the numbers they could deploy to the picket lines. The strike settled into a holding pattern. The peace didn't last.

Strikers lined up to vote. But so did replacement workers, inside the plant. When some strikers reached the table they were told their vote might not count because their jobs had been taken.

Workers' anger was also finding another target — the union itself, which they blamed for poor representation and counsel.

At the same time, the company was learning to live without the strikers. Steve Curtis found work at E.K. Blessing Co._ one of a handful of instrument makers left in town — then discovered his new employer had a contract from Bach to make trumpets. He was assigned to other work, but it left him uncomfortable.

Then again, at least he had a job.

___

Early on, work after Bach was relatively easy to come by. But by the summer of 2008, Elkhart's strength — the RV factories — was turning in to a painful weakness.

Families had once road-tripped to Elkhart to choose a customized home on wheels. But the recession was taking hold and as consumers cut back, they crossed RVs off their lists. Lenders cut credit to manufacturers. Dealers slashed orders. Plant after plant — Odyssey Group, Pilgrim International, Monaco Coach — sent workers home and shut down lines.

In months, unemployment doubled. By this spring, the area jobless rate reached 18.9 percent. Within Elkhart, it neared 21 percent.

Steve Curtis, laid off from another horn maker, grabbed a friend's offer for 20 hours a week in his instrument repair shop.

The battle would be decided by the vote. After months of lawyers' arguments, federal inspectors tallied up ballots — 113 to get rid of the union, 107 to keep it. But eight ballots — enough to swing it either way — were still contested and uncounted.

On Monday, Aug. 4, strikers were back on the picket line when cell phones began to ring. The ruling was in. The ballots of two strikers — James Klein and William Seigler — would not be counted because they had been replaced.

After three years, four months and four days, there was nowhere to go but home.

"It's over," Stacy Curtis told Steve when she found him at work. "It's over."

___

But for workers in their 40s and 50s, it's not nearly so clear.

Others see their best chance beyond Elkhart. Deneen Stout, just divorced and with a new associate's degree, figures she'll move away and find a job as a medical assistant.

"Don't put any dates or years on your resume," she counsels former co-worker Chuck Miller. "That way they can't date you. I learned that in college."

By noon, workers are filtering out, carrying leftover chicken in foam boxes. But Stacy Curtis is not quite ready to call it over.

She points her pickup back down Industrial Parkway for the first time in weeks. In front of the Bach plant, she passes the one remaining testament to the past three years — a light blue mailbox strikers put up when the picket line became a second home — and slows to tally all the empty parking spaces.

But now she's seen enough. She gives the F-150 a little gas. Down the street, she's heard, a warehouse is getting ready to open. Maybe they need a worker with experience. She might as well ask.

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Retirement Dreams Under Siege - Free Internet Press

Posted: 17 Oct 2009 11:16 AM PDT

"You look at this and you say, 'Jesus, this is painful' … I know people in the plant, I know their families. So it is very, very agonizing to see these people who have worked all their life to try and get a pension - and, all of a sudden, it falls apart."

Canadians are facing a national pension meltdown. Decades in the making, it has worsened dramatically during the recession. Businesses are shredding pension promises, retirement savings are shrinking, employees are working longer and the elderly are selling homes and returning to the workforce. As the retirement dream fades, policymakers seem unwilling to tell Canadians they have not saved enough to retire.

"We have overestimated our capacity to protect the needs of retirees," says Harry Arthurs, former head of an Ontario commission that identified numerous flaws in the province's pension regime.

"We now know there is no such thing as a pension or retirement promise," says Arthurs. "There is no certainty."

A slow retreat by companies from their pension obligations turned into a gallop this year after a severe global recession laid bare the frailties of the promises made to employees. The withdrawal is major factor behind a startling statistic: Eleven million Canadian workers, about 60 per cent of the work force, do not have a pension plan.

Those corporate pension plans left standing also face unprecedented stresses. Market turmoil has punched an estimated $50-billion deficit hole into Canada's corporate pension funds, according to experts who have crunched what little current data is available.

The cost of replenishing the deficit is squeezing businesses when they can least afford it. Pension costs are spiraling as retirees live longer and the baby boom generation heads for the exits: More than 40 per cent of workers will reach retirement age over the next two decades.

A crisis this large isn't just financial. It's also tearing the fabric of Canadian society. Retirement anxiety is changing our notion of personal wealth. Where once a house and two cars were symbols of success, today the measure is more likely to be the size of your nest egg. And as with any wealth metric, there is a class system. At the top of the system is a shrinking royalty. The majority of them are public servants: About 84 per cent of public-sector workers are pension plan members, most of whom have gold-plated pensions designed to guarantee retirees fixed incomes.

At the bottom are the pension paupers, the millions of workers who never had an employee retirement plan - and whose taxes contribute to public-sector pensions that they can only dream about.

Apart from fraying Canada's social fabric, the growing ranks of pension wounded pose long-term challenges for an economy that depends on consumer spending. Aleris' Walker, who stands to lose 40 per cent of his pension income, plans to survive by simply spending less.

While the casualties mount, businesses are stepping up their lobbying of federal and provincial governments for more latitude to ease pension burdens. "Existing deficit funding rules may threaten the sustainability of many Canadian companies and ultimately the pensions of their retirees and employees," Calin Rovinescu, chief executive officer of Air Canada, told the Globe and Mail newspaper.

In July of this year, the airline won a special 21-month reprieve from its employees and the federal government to delay repairing its $2.9-billion pension deficit. It is one of seven companies lobbying Ottawa to allow businesses more time and discretion to replenish pension deficits.

Federal and provincial governments, which divide responsibility for pension regulation, have responded to the pension crisis by granting businesses like Air Canada extra breathing room to replenish underfunded pensions. But these measures are little more than Band-Aids applied to a critically injured system. No policy maker seems willing to admit that the corporate pension promise is broken and Canadians need to save more to survive retirement.

While governments watch from the sidelines, bankruptcy courts have become the de facto policy maker. The fate of thousands of elderly workers and retirees is being decided in court-supervised restructurings.

The narrow lens of the commercial court judges has produced some recent decisions that have weakened employees' pension rights.

"No one is doing anything for us," says LeRoy Pickett, a 67-year-old retiree. When his employer of 39 years, Slater Steel Inc., declared bankruptcy in 2003, he lost nearly 30 per cent of his pension. His wife had to return to work and the couple were forced to sell their house in Hamilton. "It makes you feel like a horse being sent to the glue factory after a long time of work," says Pickett.

Disaster In The Making

The surprising thing about Canada's pension crisis is that it has caught anyone by surprise. Like a volcano that has been spewing ominous clouds for years, the crisis was foretold for years by countless academics, consultants and government panels. Four provinces - British Columbia, Alberta, Ontario and Nova Scotia - have recently had commissions report on pension woes. To the same end, Ottawa has created a joint federal-provincial task force that will report in December.

For all this seeming attention, however, there has been little meaningful change in the country's fragmented pension regime for nearly two decades.

"Our politicians don't want to talk about this. They always hope that someone else will deal with it," says Claude Lamoureux, former head of Ontario Teachers' Pension Fund, one of the country's largest public-sector pension pools.

The crisis is making for some unlikely rebels. Next week Oct. 21 Nortel Networks Corp.'s highly organized fraternity of 11,000 retirees is demonstrating on Parliament Hill, two weeks after similar rally at Queens Park. Among the leaders is Robert Ferchat, a former president of Nortel Canada, who retired in 1991 and saw his pension checks frozen after Nortel's collapse. He never imagined he would one day march arm-in-arm with union leaders.

"When I worked at Northern Telecom, it was king of the world," he says. "Today its pensioners are victims of years of mistakes and bad luck. It is outrageous to me that during this time executive compensation rose dramatically, while pensioners became more vulnerable."

Some workers have been able to ease the sting of lost pension income with savings invested in registered retirement savings plans (RRSPs). But workers with company pensions can only take limited advantage of the tax break on RRSP contributions. Stock market volatility and high management fees on many popular retirement funds also point to the drawbacks of these investments.

"It turns out the private savings in RRSPs were not as good as we thought it would be, because those that did save have been hurt," says Bob Brooks, recently retired vice-chairman with Bank of Nova Scotia.

Historians believe that Hudson's Bay Co. pioneered Canada's first pension plan in the 1840s as an incentive to lure managers to desolate trading posts. Soon, rapidly growing railroads, banks and department stores were dangling pensions to cement the loyalty of the skilled workers they badly needed for expanding empires.

The genius of these early plans was that costs were minimal. Only a lucky few employees would live long enough to collect benefits - up until 1950, the average Canadian life expectancy was under 65. Ottawa joined the pension movement in 1927 with a plan that helped provinces ensure every Canadian over 70 would receive $20 a month.

As the economy grew and prospered after the Second World War, pensions came to be seen as a worker's birthright. The federal government's Old Age Security program and Canada Pension Plan, as well as the Quebec Pension Plan, were created to ensure that no retired employee fell below the poverty line.

Supplementing these Spartan plans were increasingly rich company pensions that promised a comfortable retirement.

By 1977, 46 per cent of the work force was enrolled in employment pension plans. The public/private split was already clear: 75 per cent of public-sector workers were registered in plans, compared with 35 per cent in the private sector, according to Statistics Canada.

Since then, the pension blanket has slowly unraveled. Core manufacturing sponsors transferred operations to lower-wage countries or switched to cheaper defined-contribution plans. By 2007 this shift was so pronounced that the percentage of companies offering defined benefits had dropped by half, to 15.7 per cent. And by that year, 84 per cent of public-sector workers had rock-solid defined benefit plans.

Since then, the pension blanket has slowly unravelled. Core manufacturing sponsors transferred operations to lower-wage countries or switched to cheaper defined-contribution plans. By 2007 this shift was so pronounced that the percentage of companies offering defined benefits had dropped by half, to 15.7 per cent. And by that year, 84 per cent of public-sector workers had rock-solid defined benefit plans.

The heady returns led to a complacency that blinded workers, employers and governments to the fault lines. During these good times, some businesses siphoned off a portion of pension surpluses while others took pension contribution holidays - in part because Canada's tax laws penalize companies that plow extra savings into plans. Adding to the environment of complacency was the unchecked optimism of actuaries, the gatekeepers who are required by law to test the solvency of pension funds. As markets inflated, actuaries continued to assume that abnormal investment gains would deliver sufficient returns over the long term to cover rising pension costs.

"We tended to think this was tomorrow's problem, but tomorrow's problem is here today," says Lamoureux.

The Breaking Point

The crisis erupted with a bang last fall when the global financial meltdown knocked the stuffing out of pension portfolios and retirement savings. Almost overnight, the rosy investment forecasts of actuaries and pension managers began to look delusional.

Taking the pulse of corporate pension plans is no easy matter in Canada. Pension oversight is divided among federal and provincial regulators that rely on outdated data to monitor pension fund health.

Typically, pension funds are subject to actuarial assessments of their solvency only every three years. Thus the full impact of the market collapse will not be known at many funds for several months.

Still, a number of pension experts have made some educated guesses about the hit that funds have taken. RBC Dexia, a pension services company, estimates major Canadian pension plans " those with more than $1-billion of assets - saw assets swoon by an average of more than 18 per cent last year.

The carnage was particularly gruesome in the private sector, where pension managers are significantly less experienced than their public-sector counterparts. "The pension burden has proven to be too great," says Ian Markham, a director with pension consultant Watson Wyatt Worldwide, who estimates the average Canadian corporate plan is 20 per cent short of the assets it needs to fund its long-term pension obligations. That deficit adds up to about $50-billion, a staggering IOU that is crippling a number of companies.

The overall impact of the recession has forced a record number of Canadian companies to liquidate or restructure their operations. Hidden behind these bankruptcy statistics are a growing number of crippled companies with pension deficits.

Again, there is no precise current data, but pension professionals say they have never seen so many companies land in bankruptcy proceedings with broken pensions.

"We are witnessing an unprecedented pension crisis," says Brett Ledger, a corporate pension litigator with Osler Hoskin & Harcourt LLP. "It's going to get a whole lot worse," he predicts, because another wave of struggling companies is drawing closer to bankruptcy.

It is in these proceedings that the worst of Canada's pension flaws are revealed. Many retirees and employees have no idea that their pension funds have deficits until their companies land in court. Several former workers at Slater Steel only learned the company was in bankruptcy proceedings in 2003 when their pharmacists informed them that their benefits had been cut off.

There are so few warning signs because actuarial check-ups are so infrequent. But even these infrequent analyses, experts warn, can be subjective and sometimes very wrong.

In early 2002, only a few months before Slater Steel filed for bankruptcy protection, two pension funds at subsidiary Slater Stainless Corp. received a stamp of approval from Melvin Norton, a veteran actuary with Aon Consulting Inc. The Ontario Superintendent of Financial Services, the province's pension regulator, later concluded the funds were in fact 40-per-cent underfunded. It sued Mr. Norton for allegedly filing a false actuarial report.

The charges against Norton were dismissed by an Ontario judge. In 2008, the Canadian Institute of Actuaries fined Norton $15,000 and placed him under supervision for six months after it found that he had failed to perform professional services with "skill and care."

Norton says he was not responsible for the pensioners' losses. "It was the fact that the company didn't put enough money in the plan."

"We need an early-warning system," says Arthurs, who headed the Ontario commission. "There is a wide zone of discretion left to actuaries who are making judgments about the health of pensions."

Justice can seem selective for pensioners whose funds become entangled in bankruptcy proceedings.

In court, however, workers, unions and even pension regulators have been locked in losing battles against creditors. In two recent cases, creditors offering new financing have successfully demanded that the courts suspend payments owed to repair pension deficits.

By trumping pension laws, the judges in these cases are seeking to strike a reasonable commercial solution that can help the companies survive and possibly one day prosper sufficiently to repair ailing pensions. But these decisions come with risks. If restructuring efforts fail and company assets are liquidated, pensioners have little hope of recouping owed pensions, because they are outranked by most other creditors.

"Everyone feels like a victim here," says Carol Kirton, 52, who has worked for 32 years at one of the companies - the Port Hope, Ontario-based branch plant of U.S. auto parts maker Collins & Aikman Corp.

Ms. Kirton says company officials have disclosed that the pension has a 30-per-cent shortfall. After two years of bankruptcy protection, she says hope is fading that the company will survive.

Concerns are rising among labor groups and their legal advisers that bankruptcy proceedings are becoming a place were companies can too easily amputate their infected pensions.

"Bankruptcy, or the threat of bankruptcy, is being used to eviscerate pension funding," says Murray Gold, an adviser to Ontario's Arthurs commission and a Koskie Minsky LLP lawyer who specializes in representing labour groups. "Bankruptcy court … is not the right place to make social policy."

Attention Must Be Paid

There are other places besides bankruptcy court to reform a damaged pension regime. But these court room tug-of-wars will likely continue until governments, businesses and workers adopt what former Ontario pension commissioner Arthurs calls "a new mindset." That new approach would recognize that battles over shrinking corporate pension plans have, at best, only fixed the system at the margins and, at worst, delayed momentum for change.

Turning the Band-Aid solutions into a blanket fix for Canadian retirees would require Ottawa and the provinces to take a difficult and politically unattractive first step: Recognizing that the century-old business promise of a comfortable retirement is vanishing like the trading companies, retailers and railroads that first introduced them. Until that happens courts will continue to be the graveyards of broken retirement dreams.

Just ask Walker, the former Aleris executive. "This is a dream buster …. People have really been caught short."

Intellpuke: Kudos to reporter Ms. McNish and the Globe and Mail's editors for the work they did on this thorough and very informative article.

You can read this article by Globe and Mail staff writer Jacquie McNish, with files from staff writer Greg Keenan, reporting from Toronto, Ontario, Canada, in context here: www.theglobeandmail.com/report-on-business/retirement/retirement-dreams-under-siege/article1327536/

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Luke’s Mobil ditches gas - Adirondack Daily Enterprise

Posted: 17 Oct 2009 10:48 AM PDT

Luke's Mobil ditches gas

By JESSICA COLLIER, Enterprise Staff Writer

TUPPER LAKE - On a Friday afternoon at 4:30 p.m., Luke's Mobil is bustling with activity, with customers flowing in and out and transactions taking place left and right.

And that's without the gas.

Walt Christy said he can make as much by changing one tire as he can in a full day of selling gas.

That's one of several reasons that, after 35 years in business as a self-service gas station, Luke's Mobil has stopped selling gasoline.

"I'm just going to be an auto-repair station," Christy said.

The spike in gas prices also factored into the decision. He just wasn't making enough money on gas for it to be worth selling it, he said. When costs were high in recent years, people started buying from the cheaper gas stations, and his was always the most expensive.

"Now someone else can be the high guy," Christy said.

Plus, people are looking for a place where they can grab a drink or a snack when they fill up their tanks, Christy said.

On top of that, he was sick of dealing with state agencies like the Department of Environmental Conservation and the Adirondack Park Agency.

"These are all things I've been contemplating for a year before I made my decision," Christy said. "I'm ready to move forward. It's like a big weight off my shoulders like you wouldn't believe."

So over the last few weeks, he removed the pump stations and dug out the gas tanks. He hauled it all to Plattsburgh and sold it for $1,200 as scrap metal.

Besides auto repair, Christy will also now concentrate on his new venture as a U-haul center and stay busy with AAA towings and repairs.

"A lot of people are going to miss it," Christy said of getting rid of gas.

He had a number of older people, as well as one paraplegic, who were faithful customers.

Christy, who partnered with Luke LeClair in 1987 and bought the business from him in 1997, said he will likely change the name of the station in the near future to something like Luke's Auto Repair.

The name Luke's is a landmark, not a person, Christy said, which is why he never changed the name of the place once he took it over.

"Everybody knows it as Luke's," Christy said.

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Contact Jessica Collier at 891-2600 ext. 25 or jcollier@adirondackdailyenterprise.com.

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'Slow and steady wins the race,' says machine shop owner - Daily Territorial

Posted: 17 Oct 2009 10:05 AM PDT

CEO INNER-VIEW: David Robles

By Gary Hirsch, Inside Tucson Business
Published on Saturday, October 17, 2009

David Robles is president of Central Components Inc., a machine shop he founded and has led for 16 years. In some ways Robles personifies the adage, "slow and steady wins the race."

Born and raised in Tucson, he's never left. Like many small business owners, he has no formal business education but has prospered through intuition, good judgment and the ability to filter good advice from bad.

Growing up he knew he had a high mechanical aptitude. He recalls, "I took apart bicycles and lawnmower engines and helped maintain the family car." In high school Robles was the "A" student in auto mechanics. A teacher recognized his potential and sent him to a friend in the business of rebuilding industrial engines. Robles interviewed and was hired for a summer job, which grew to a part time job once school resumed and a full time job after graduation.

While many people flit from job to job Robles' record is unique and helps account for why he's learned his field so well. From graduation until 1992, about 14 years, he worked for one company, Industrial Component Repair, providing industrial repair for the mining industry. He recalls, "I started as a laborer, went into machining, learned assembly and testing and finally was promoted to the management floor."

Ever industrious, in the off hours he took on small machining jobs that his company was unable or unwilling to do. He credits his dad with instilling this work ethic. "My dad had a small construction company. Not finding steady work he took on smaller side jobs and took us with him. Dad was a hard worker. He never held a senior position but took his job seriously and taught us confidence and hard work."

It paid off. Industrial Component Repair was sold in 1992 and things went downhill quickly. "That's what triggered the idea for me to go out on my own."

Lacking formal business education, Robles knew he could build a business on his strengths. "I have a great deal of confidence. I had managed people, many of them older. Once they realized I was capable and not cocky my job got easier and things ran well. I knew I could do it for myself."

Robles' vision is clear. For years they've done commercial machining for local clients. He's building a stronger foundation to serve the medical, aerospace and industrial markets, which demand greater precision. In his words, "We strive for excellence in machining and manufacturing components to the most exacting tolerances of process and quality. We offer exceptional service and operate with integrity and our focus on continuous improvement drives us to pursue progressive advancements in manufacturing and machining."

To that end they purchased a new 10,000 square foot building and completed their ISO:2001 certification. The shop is spotless with room to expand. Robles is determined. "We're not going to be your run of the mill machine shop — we've got things in place that will make us different, better and bigger."

Robles is quite satisfied with how things are turning out. If anything he regrets not pursuing more formal education. "I wish I had gone to college if only for the clarity that comes with knowledge. I'm a thinker and there are so many unanswered questions I wished I could have answered."

He believes to build a business you need a thick skin. "You can't let triggered thoughts block good decisions." He listens intently, collecting information and then "stomachs" the decision; relying on a combination of data and intuition.

Though humble he realizes business takes drive and courage. "I'm willing to put it all on the table. Life would be boring without challenge."

Robles has many long-time employees. "They enjoy the atmosphere. I realize the cost of turnover and pay very competitive wages for good work. I treat my employees well and they do the same for me."

For fun Robles is the crew chief for a stock car racing team. "I like putting the pieces together. I like competition and I like winning. It's spectacular. It looks simple, but there's so much that's never seen. It's incredibly rewarding to be part of that team."

To run the show requires patience and a lot of people skills — "more than I ever thought I wanted" he quips. It also takes patience. "I'd like to produce more but some processes take time. I pay close attention to product quality and to the quality of our conversations to figure out how people are doing. I'm very good at putting myself in their shoes to understand where they're coming from."

He runs the company with Flo, his wife of 28 years. "We've learned how to put together the finances and the business. We're good at different things and appreciate the differences."

If you want encouragement to start your own business Robles offers very simple advice. "If you've made the decision don't second guess it and don't look back." It

worked for him. "I woke up one day and knew it was the last day I would work for someone else. I went into work, gave notice and was fired on the spot." Other than occasional thoughts about further education, he's never looked back.

Robles wants you to know, "If you require machining done to the most exacting standards by a local company you can trust and depend on, Central Components is up to the task."

Biz Facts

Central Components Inc.

1834 S. Research Loop, Suite 6

(520) 571-1433

www.centralcomponentsinc.com

Contact Gary Hirsch at gary.hirsch@vistage.com or (520) 225-0373 to suggest a CEO or business owner for a future "Inner-view." Hirsch is a group chair and executive coach with Vistage International - www.vistage.com - and leads a group of CEOs, company presidents and business owners who meet monthly. CEO Inner-view normally appears the second and fourth weeks of each month in Inside Tucson Business.

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