The Union Wanted Wage and Benefit Increases. Management Saw That As the Path to Bankruptcy.

Was a strike inevitable?

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The month of September is usually a busy and festive time in Yakima, Washington. The much anticipated Central Washington State Fair opens and the fall harvest of apples and pears kicks into high gear. In 2004, the crop had been a good one. But Valerie Woerner, CEO of Snokist Growers, a 104-year-old fruit packing and canning cooperative, was hardly in the mood for a party. Woerner had spent the summer battling with a determined union. Now, she was facing a nasty strike--just as the crucial pear-packing season was beginning.

Between 2001 and 2003, Woerner had engineered a dramatic and, in some respects, brutal financial turnaround that had rescued the for-profit cooperative, which is owned by roughly 350 fruit growers, from bankruptcy. She slashed inventories and overhead, trimmed the work force, and scaled back benefits, cutting nearly $8 million in annual costs. But in the process, she so angered some of Snokist's cannery employees that they had sought representation from the United Brotherhood of Carpenters--which was now demanding higher wages, better benefits, and job security guarantees. In Woerner's view, those concessions would put Snokist right back on the edge.

Woerner was determined to stand her ground. But she knew that a strike could be disastrous. Many managers would be reluctant to cross a picket line. And there was a threat that unionized railroad workers and truck drivers would support the strikers, leaving Snokist's pears, plums, and cherries to rot in the warehouse. Woerner was sure that her strategy was sound. But was she really willing to put Snokist through a strike?

A 20-year food industry veteran, Woerner had known that her assignment at Snokist would be difficult when she took it in March 2001. It was a rough period for the fruit business for all sorts of reasons. The strong dollar made products too expensive to export. Fuel and transportation costs were rising, but grocery chains refused to accept price increases. Canners in China were making inroads and domestic giants, like Dole Foods and Fresh Del Monte (NYSE:DLM), were tough competitors. Just prior to Woerner's arrival at Snokist, two Washington cannery cooperatives had shut their doors.

Still, Woerner was unprepared for what she found when she arrived in Yakima. A seven-year backlog of unsold canned products sat in Snokist's warehouses. Overtime for mechanics ran so high that many earned between $70,000 and $80,000 per year, putting them on the same pay scale as top managers. "It was a real mess," she says. In 2001, the company had lost $6.5 million on revenue of about $100 million. Woerner's prescription: more automation, better coordination between business units, and a shift toward higher-margin products. She slowed production and wrote down several million dollars in inventory costs. Snokist's board, made up mostly of Yakima Valley fruit growers, strongly supported the cooperative's new CEO.

Fewer production runs, however, meant fewer hours and less overtime for company employees. And for workers, that was hardly the worst of it. For years, Snokist had been paying for health insurance for every worker; even seasonal workers were eligible when they were working. The plan was costing Snokist $2 million a year, and the cost was rising as the Snokist work force aged. For Woerner and the board, Snokist's past generosity was unsustainable. So in 2002, the company announced that it would no longer offer coverage to hourly workers. Woerner tried to soften the blow by offering a higher hourly wage. She also pointed out that most seasonal workers had wages that were low enough for them to qualify for the state's public assistance health insurance program at a cost of roughly $10 per month. Given the pay raise, she argued, many workers would come out ahead with the state plan.

In Snokist's fresh fruit division, which operates in a separate facility, the change met with little complaint. But the 270 hourly cannery workers were outraged and became even angrier when Woerner outsourced some unskilled seasonal positions to a temporary agency that paid lower wages. In August 2002, the workers petitioned the National Labor Relations Board to join the Carpenters Union. Three months later, they voted to unionize.

Contract negotiations began soon afterward and got off to a rocky start. The union demanded that Snokist restore health benefits, boost wages, and offer job security guarantees. In May 2004, the union walked away from the table, citing a hostile negotiating environment that arose after Snokist brought in an attorney from Texas who specialized in helping management win labor disputes. "He came in with a very arrogant attitude and was very rude to the bargaining committee," says Sherry Scott, a union representative. A month later, the union members voted to authorize a strike.

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