FRANKFURT, Germany—Continental A.G. is facing too many business challenges to allow its dispute with the United Steelworkers at its Continental General Tire Inc. plant in Charlotte, N.C., to escalate any further, a New York financial consulting firm believes. But Conti General called the Locker Associates Inc. report—commissioned by the United Steelworkers union (USWA)—a ``predictable tactic.'' The report criti- cized the company's handling of the union's 11-month strike in Charlotte and underestimation of the strike's effect on finances.
The 32-page report was presented to a small group of Conti investors, analysts and media July 27 in Frankfurt and later in Hanover, where the company has its headquarters. It claims the firm has underestimated the impact of the Steelworkers' corporate campaign against Conti and Conti General.
``This is another way to deliver a message to the company that there are serious consequences with not settling the conflict,'' said Locker President Michael Locker. ``It should be a concern to shareholders because it affects their value.''
The report pointed out the Charlotte strike, which began Sept. 20 when 1,450 members of USWA Local 850 walked out, already has cost Conti $5.5 million to $6 million in 1999, according to earlier company estimates. But according to each side's most recent offer, the gap between them amounts to less than $2 million a year, the report claimed.
Plus, Locker Associates claimed the company has underestimated other costs arising from the strike, including production problems at other North American plants, lost sales and legal costs.
And with the other challenges facing the company—such as integrating the newly acquired Continental Teves operation, reducing debt and staying globally competitive—it can't afford to ignore the growing labor problem, the report said.
But Conti General is compensating for any strike-related costs by cutting in other areas without letting them seriously affect customer needs, said the company's corporate secretary, Daryl Hollnagel. The firm considers its ``last, best and final'' offer—made in January and calling for more than $35 million in increased wages and benefits over the contract's life—to be more than generous and competitive.
Plus, Conti considers the Teves deal—its $1.93 billion purchase of ITT Industries Inc.'s brake and chassis operation—``the best thing to ever happen to the (Automotive Systems) group,'' Mr. Hollnagel said.
``It allows us to differentiate and become a leader as a system supplier,'' he said. ``We're not altering our focus at all because of the strike. We know what our priorities are.''
The Locker report claimed that, since the Charlotte plant represents about 49 percent of Conti General's U.S. passenger tire capacity, the strike is hurting the firm's ability to supply dealers and auto makers. The facility also is operating only at about 50 percent of pre-strike capacity, the report said.
The company, however, believes the 49-percent figure, as well as some of the other financial claims, are overstated and says the plant is producing far more tires than the union says, Mr. Hollnagel said.
``It ignores the fact that we have about 850 workers in the plant who have production up to 80 percent of pre-strike capacity,'' he said.
Locker's report stated that hiring replacement workers is a way to scare union employees at other plants and non-union employees who might be considering organization.
The company never had an objective of using the strike to instill fear or gain bargaining leverage, Mr. Hollnagel said.
``We wanted an agreement from the beginning and still do,'' he said. ``I suspect there's a sense of desperation on their part, because they see truckloads of tires going out every day. The only effective tactic is bargaining, and we're ready to do that.''
The Locker report also claimed that if National Labor Relations Board charges against the company stick and the union makes an unconditional offer to return to work, Conti General could be paying union members $1 million a week before all the workers are brought back.
Mr. Hollnagel said there's no way to tell what that situation would cost the firm, but the NLRB first has to determine the labor dispute is an ``unfair labor practice.''