Rubber's Costly Showdown

Plastered to the gold-wallpapered column in the lobby of the Sheraton-Cleveland Hotel, a newly printed bumper sticker proclaimed: DON'T BUY FIRESTONE PRODUCTS. Nearby, in an elegant ballroom, negotiators for Firestone Tire & Rubber Co. and the United Rubber Workers had failed to wrap up a new contract--and so, across the nation, 60,000 union members walked off their jobs at plants of the industry's Big Four (Firestone, Uniroyal, Goodrich and Goodyear).

The strike illustrates a growing danger for the economy: what had been expected to be a relatively peaceful labor-bargaining climate this year is turning testy. The walkout will not immediately hurt national production, but a long strike could damage the recovery, and a high settlement could pump up now-subsiding inflation. Unhappily, the nation is almost sure to get one or the other outcome, if not both. As one Detroit Uniroyal worker put it, "We settled short last time, and now business is booming and we gotta get ours."

"Last time" was the spring of 1973, when Phase III wage and price controls were in effect and the U.R.W. signed a contract providing a 6.2% maximum annual pay and benefits increase and containing no cost-of-living adjustment (COLA) provision. Since then, prices have risen so fast that the rubber workers, who now make an average of $5.50 an hour, have found that their purchasing power has slumped 8% despite the raises. Most galling, auto workers, whose pay scales the rubber workers have traditionally paralleled, negotiated their 1973 contract after Phase III had expired, and pushed their pay scales $1.45 an hour above the U.R.W. rates.

The U.R.W. selected Firestone as its "target company" and demanded a COLA with no "cap," or limit, plus a $ 1.65 hourly raise ($2 for skilled tradesmen) right away. The union also asked for further raises in the second and third contract years and an increase in fringe benefit expenditures from $3.55 to $4.73 per hour. Further, it demanded that workers who do not produce tires be paid no less than tire workers.

Global Boycott. Firestone and the other companies protested that operations producing shoe heels or tennis balls face intense competition from nonunion factories, and could not afford to pay tire-factory wages. The U.R.W. may compromise on this point, but across-the-board raises are another matter. Just before the strike deadline, Firestone increased its wage offer by a dime, to a $1.15 hourly raise over three years, and offered a COLA that would be activated if the Consumer Price Index rose more than seven percentage points in any one year. Peter Bommarito, 60, the U.R.W.'s tireless, white-moustached president, called the offer "insulting."

Bommarito's followers are primed for a long strike. The U.R.W. has called for a worldwide boycott of Firestone products beginning May 1, and the AFL-CIO has extended its endorsement--a gesture it does not make lightly. But since marshaling support for a global boycott can take some time, it is unlikely that a don't-buy-Firestone campaign can have much effect before June.

Nor will the strike do much damage for a while. The automakers, who get some 65% of their tires from the Big Four, have stockpiles that should last up to a month. Dealers of replacement tires should be able to hold out longer. Yet a long strike eventually could shut down the auto plants, dealing national production a crippling blow.

The rubber companies will be under great pressure to come close to the union's demands. The Ford Administration has demonstrated that it wants no long walkouts in an election year; it accepted, as the price of settling a two-day strike, a Teamsters' contract that may raise wages and benefits 33% over the next three years. Moreover, the rubber companies are expected to increase their profits by perhaps 33% this year, thanks to the growth in auto production. Firestone President Richard Riley has forecast a 23% growth in worldwide sales of original-equipment tires.

Recently Merrill Lynch Pierce Fenner & Smith predicted that the U.R.W. would win a 41% wage-and-benefits increase over three years. If that happens, the brokerage firm calculates, tire prices will rise 6% this year and 3% in each of the next two years. The Interstate Commerce Commission last week approved a 6% increase in freight rates that truck lines had requested in anticipation of a fat Teamsters contract; the truckers are expected to ask for another 7% to 8% next year. The C.P.I, rose at an annual rate of only 2.4% in March, but nobody expects the rate to stay that low. If wages push up prices, hopes for holding the inflation rate below 6% this year could vanish quickly. Worse, as Robert Nathan, a member of TIME'S Board of Economists points out, new contracts with unlimited COLA clauses will have their biggest inflationary impact in 1977 and 1978.

Yet that is precisely the kind of contract that future labor negotiations are likely to produce. Two unions of electrical workers have already informed General Electric they will accept no cap in a new agreement, and will require big raises besides to catch up with past inflation. The G.E. contract expires on June 27, and Westinghouse's two weeks later. "Once you get a pattern established, it can be hard to stop," muses an Administration labor official. "When the rank and file in one union see another union strike and get a good settlement, they start agitating to do the same. We're just hoping it doesn't get contagious." He is a bit late; the contagion seems to be in the air.

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