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Published December 06, 2011, 08:01 PM

Key to competition

American Crystal Sugar Co. holds its annual meeting in Fargo, N.D. Crystal managers were told to stick to guns on labor and said the workforce remains an integral part of the company's future

By: Mikkel Pates, Agweek

FARGO, N.D. — “Don’t back down.”

That the message that David Berg said he hears loud and clear from shareholders of American Crystal Sugar Co., which is in the midst of a labor contract impasse that has dominated news reports in the past several months.

The Bakery, Confectionery, Tobacco Workers and Grain Millers members twice have voted down a proposed, five-year contract, first by 96- and then 90-percent majorities. The company has hired a company to procure workers to replace the 1,300 union employees.

Union members and supporters conducted a prayer vigil meeting Nov. 30. A “stakeholder” meeting with local government leaders will be staged Dec. 3 in Fargo, N.D.

The Crystal annual meeting was in higher drama than any such meeting in the past 25 years, with extra security in the wings during the meeting and its after-hour socials. In its joint meeting with the Red River Valley Sugarbeet Growers Association, the political speeches were shorter than usual, and there were no question-and-answer periods, despite looming budget cuts and uncertainty over replacing the 2012 farm bill.

A board shakeup in an annual reorganization meeting after the main shareholders meeting was not related to the labor issue, officials said.

Berg described the 2010 crop results as a “very nice sized crop” that was high-quality, and factories ran well, capitalizing on a “three year extended rally” that was driven by a drought in Russian production areas and a too-wet year in Brazil. That drove the company to a record-high $73.02 per ton beet payment on the 2010 crop. The company projects a $59 per ton gross payment for the 2011 crop, but that could go up.

In a news conference at the co-op’s annual business meeting Dec. 1 in Fargo, Berg was asked about political support for the labor tactics within the company. He answered that he’d met with a total of 1,500 growers in meetings since July and could “count on one single hand” the number of growers who are telling him he thinks the company isn’t properly managing the labor deal.

Support for tactics

Competition was the word of the day, and the reason for the labor dispute, Berg said. Farmer-members think, “based on what management has told them,” that the labor is a key component in our competiveness going forward,” Berg said.

“We need to deal with this labor issue now, so they will have the opportunity to raise sugar beets, the opportunity to make a profit raising sugar beets and the opportunity to make a profit raising sugar beets, and the opportunity to provide a job going forward in those factories,” Berg said. “We could give wonderful raises and unlimited health care benefits, bankrupt the company, and who benefits from that?”

Front-page newspaper articles about executive compensation were a subject of disgust by some growers chatting in the hallways. Some said executive compensation reflects values of so-called “phantom” shares of stock, and the values of those shares don’t stay constant.

Berg said there have been no significant abnormalities as non-union replacement workers have run the factories thus far. As a former vice president of operations, Berg said this year’s pulp dryer fires and diffuser breakdowns were “process upsets.”

“What we’re experiencing this year is the same stuff. They seem to get highlighted more this year for some reason,” Berg said.

Similarly, he says there have been no changes in factory safety.

“We track safety very, very carefully and safety this year is no different than anything in the past,” he said. “I think that’s a pretty significant accomplishment here because we have people who have not been around sugar beet factories. They come in with the attitude, ‘I’d better watch myself and be careful,’ and they’ve been doing a good job.’ Yes, there have been accidents, but nothing out of the ordinary.”

Steady as she goes?

Berg said the beet slice rate is “about average” although not equal to last year’s record.

While there is “room for compromise” in the labor deal, the company was “prepared” to deal with the labor contract dispute, even though it has negative “economic and emotional impacts.” The contract is hung up over seniority issues as well as the company’s desire to get union members to share in health care costs.

“I can give you hard data that, under the first offer made to the union on July 28, before the lockout occurred, that they would be — I think — in the range of $5,000 to $6,000 better off each year in a five-year contract,” said Berg, who holds a master’s degree in agricultural economics. “And that goes under conservative assumptions on how they use their health care.” He said the labor costs are being set for five years and the company has to manage cost component, which is a $90 or $100 million annual bill.

Meanwhile, Berg said the company has had a “very nice response” to advertisements placed in newspapers and on the internet in recent weeks, seeking temporary, interim workers to fill jobs in the ongoing lockout. The company has started screening and aptitude-testing candidates. “We’re quite pleased,” he said of the potential workers, and the first batch will start Dec. 12. He declined to confirm that 100 have been hired.

Berg repeated that the company is “ready to negotiate this afternoon if the time comes” and couldn’t say “what constitutes a first move” but that is a mediator’s role to determine what that time is.

He said he anticipates that, at some point, the labor settlements will end and that long-time workers can go back to work and make the company as “successful in the future as we’ve been in the past.”

Will it ever heal?

Berg said that if the two sides reconcile, “bruises take a while to heal, but we will get over it.” Asked whether there is a “greed” factor for his high compensation levels when union members perceive a cut-back, Berg said he, too, has the option of turning down a salary offer.

“If I didn’t want to work under the terms they offered, they could certainly say your employment has been terminated here,” Berg said. “We have not terminated the locked-out employees. We expect to find a settlement.”

As for the political implications, Berg said he thinks the union should support sugar provisions in the farm bill because the jobs the hope to resume will depend on having a viable sugar program.

“Those jobs depend on having a sugar program. Those union members, if they want to have those jobs in the future, as we all do, they should support the sugar program going forward. I know they won’t today. That’s a realistic expectation. When there’s a settlement, I think their commitment to keeping these factories viable, having a good sugar program, will come through,” Berg said.