Insight: Wisconsin clash spotlights U.S. labor-management rift

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1 of 7. Union workers and members of the United Auto Workers (UAW) march around the Oshkosh convention centre in protest against their employer Oshkosh Corp., in Oshkosh, Wisconsin October 12, 2011.

Credit: Reuters/Darren Hauck

By John D. Stoll

OSHKOSH, Wisconsin | Fri Oct 14, 2011 10:30am EDT

OSHKOSH, Wisconsin (Reuters) -- Oshkosh Corp has been a rare lifeline for the beleaguered United Auto Workers, one of the few American manufacturers to have added significantly to its ranks of well-paid union workers in a brutal decade for factory hands.

But now, as the UAW renews conciliatory contracts with major automakers that have dismissed tens of thousands of hourly workers, union employees are turning against Oshkosh.

Tim Jacobson, 32, is among the workers who have rejected a new contract forged by union leaders with the maker of military vehicles and fire trucks. They are marching in the streets of this university city on Lake Winnebago to denounce an employer that has nearly doubled its UAW staff to 3,100 over the five-year span of its last union contract.

Jacobson himself was hired by Oshkosh two years ago, less than a month after he was laid off from a nearby Harley Davidson plant.

"What's disgusting?" Jacobson shouts, carrying an American flag as he leads a line of 150 workers at a recent rally downtown. "Union busting," the crowd responds.

This seemingly paradoxical labor standoff stems from grievances almost unique to Oshkosh, whose profits have been flush in recent years, and from a broader animus between labor and management, both nationally and in particular in Wisconsin, where a clash over the power of public-sector unions transfixed the country over the summer.

"Frankly, a lot of people here are pissed off," Jacobson said. Workers complain that the new contract erodes work rules, security and seniority rights - such as a demand that workers can be required to work up to ten Saturdays per year. Particularly galling to them is the company's call for more temporary, non-union positions. When Oshkosh sought union approval to hire as many as 300 temporary workers starting in 2013 as part of its original contract offer, the workforce rejected it.

The most recent rejection, on Saturday, was the second in a week. The company had offered as much as an 8.5 percent raise and $2,000 signing bonus to offset to rising healthcare premiums. Oshkosh had attempted to craft a similar deal in 2010, a year before the contract's expiration, and met resistance then as well.

An outright strike is unlikely. UAW and Oshkosh officials returned to the bargaining table on Wednesday. A third deal, without any demands for temporary worker provisions, will likely be handed to workers this weekend, according to people familiar with the talks. These people expressed confidence that the third attempt for ratification will work.

If it goes through, the victory for the UAW could well be overshadowed by friction it is facing with a much bigger member, Ford Motor Co.

Dissent isn't a new phenomenon for the UAW. In Detroit - home of the union's core constituency - workers have shown a willingness to vote down automaker contracts in even the worst of times. And now, as Ford seeks ratification for a new deal that includes lucrative bonuses, there is widespread concern that workers there will vote no. As of Thursday, two Ford factories had rejected a proposed four-year deal, throwing its ratification into doubt.

And with protestors on the streets of Oshkosh, Wisconsin where even the deep erosion of the industrial heartland has been kept at bay, the thread of distrust sewn into labor-management relations is proving difficult to sever.

Oshkosh's desire to bring in temps follows a pattern set by most of the nation's industrial heavyweights, such as Caterpillar Inc, who want to meet shorter-term production needs without having to bring on another crop of permanent employees. Workers here firmly believe this will lead to an inevitable loss of union jobs.

"Our members have been getting very angry out there," UAW Local 578 President Nick Nitscke recently said while standing in the lobby of the Oshkosh hotel, the site of the labor negotiations. He pointed to a street corner where hundreds of workers have protested several times in recent weeks. "They do not want anything to do with temp workers."

PICKET FEVER

This schism between the workers and their union has many outside observers scratching their heads, coming as it does with the rest of the country plagued by economic malaise.

Oshkosh has been on a roll thanks to winning big contracts to build military vehicles in recent years, though it now faces new headwinds as government-spending cuts and increased competition squeeze the defense industry. Management has been hitting this theme hard.

In a letter accompanying its first offer to UAW workers last month, Chief Executive Charles Szews said, "the company's offer takes into consideration today's economic realities for our principal customer, the U.S. Department of Defense, which is facing hundreds of billions of dollars in budget reductions." Workers are largely dismissive of that outlook.

Like many others in the area, Rep. Gordon Hintz, a Democrat representing Oshkosh, sees the current conflict as at least partially influenced by the protests over public-sector unions that polarized public opinion, just 87 miles to the south in Madison. The Occupy Wall Street movement is also energizing workers, he said. "Does Wisconsin have picket fever? Yes, I think there is a little of that."

A broader anxiety is also underpinning the workers' resistance, says Mike Schroeder, a longtime Oshkosh worker recently elected as a chief bargaining steward. "People have not gotten the entire story of what is really going on here. This isn't really about money," he said. "This is about job security."

A significant portion of Oshkosh's workers here were hired as the company was scrambling to fill orders from the Department of Defense, while other Wisconsin manufacturers -- including Kohler Co., Harley Davidson, and Mercury Marine - were laying people off and, in some cases, hiring more temps. As a result, Oshkosh was able to hire skilled manufacturing workers who harbored a deep resentment toward non-unionized employees doing short-term work.

Jacobson, who worked in a Harley Davidson factory for seven years, is one such employee. "I was laid off from Harley on September 25, 2009," he said. Two weeks later, after applying for a job online, he went to work in an Oshkosh factory. "I don't want to go through that again."

Harley didn't actually negotiate a temporary worker deal with its union until after Jacobson left, a spokeswoman said. The company has yet to hire temps in Wisconsin, she said.

ENGINE TROUBLE?

Oshkosh Corp. is a key cog of the local economy. "Had it not been for Oshkosh Corporation and the success they had in the defense sector, this region could have been in serious trouble," said John Casper, president of the local Chamber of Commerce. State and city officials recently authorized hundreds of millions of dollars in economic incentives to encourage Oshkosh to keep key defense work in the region.

Even facing headwinds, the company's impact on job creation in the community is wide-ranging. This spring, more than 3,000 people packed into the local convention center, where Oshkosh was holding a two-day job fair to fill up to 750 jobs, all of which went to the UAW.

Since Oshkosh signed its last contract in 2006 with the UAW, revenue has more than tripled, hitting $9.8 billion in 2010, with operating profit nearly quadrupling to $1.4 billion, although Wall Street estimates suggest those numbers are falling in 2011 due to softness in defense spending.

A contract to build billions of dollars worth of M-ATV and F-MTV military vehicles fueled the boom, allowing Oshkosh to wipe away much of the debt it took on when it purchased aerial-lift maker JLG Industries Inc. in 2006. That acquisition was intended to help Oshkosh diversify away from its core military business. Oshkosh also makes heavy vehicles for municipal use, such as fire and garbage trucks.

But with more than $1 billion in long-term debt, the heavy reliance on defense contracts for operating profit has turned one of the company's best sources of optimism into become something of an Achilles heel. Its signature M-ATV is now nearing the end of a hugely profitable production run, and its new bread-and-butter military vehicle, the F-MTV, has failed to turn a profit.

In its earnings call in July, Oshkosh said the vehicle will be profitable in the fiscal second quarter of 2012, later than initially expected.

"There's been a great recognition that defense contracts are running off," JP Morgan equities analyst Ann Duignan said in a telephone interview. She said the defense industry is stuck in a "brutal cycle" and "you could almost say absent another new war we could be in a secular (defense) decline" that could accelerate Oshkosh's issues.

Shares of Oshkosh have suffered under the weight of these concerns, sinking nearly 50 percent this year. Some on Wall Street have speculated that the company's market value - falling from a 52-week high of $3.6 billion to about $1.7 billion currently - makes it an attractive takeover target.

Billionaire investor Carl Icahn reported owning a 9.51 percent stake in the company over the summer, saying in a federal filing that he would meet with management to enhance shareholder value. Icahn did not return calls and emails requesting comment.

A LONG WAY FROM DETROIT

Unlike other Rust Belt communities in the Midwest, the City of Oshkosh has been a pocket of relative stability. The Fox Valley has benefited from diversification efforts that the business community employed after the collapse of the region's paper industry decades ago. Employers Kimberly-Clark Corp and Gulfstream are two big ones that continue to invest.

For the City of Oshkosh, the presence of a state prison and the University of Wisconsin Oshkosh provide an added layer steady employment. Local officials say unemployment is trending lower than the state average. But recent developments in Wisconsin's public sector have shaken confidence.

"There's a lot of uncertainty, and I would even say fear around here," said Tom Willadsen, pastor of First Presbyterian Church in Oshkosh. "We have university professors who effectively had an eight percent pay cut because of a health care increase.. These people were hit very hard, and hit very suddenly, and clearly there is a sense that unions are under attack."

That uncertainty has spilled directly into the private sector, leading to talk among Oshkosh workers about perceived threats to job security.

"A lot of people even spend a lot of time on Facebook dealing with this," said Shawn Cronin, a 27-year-old father of two who joined Oshkosh while in the National Guard. Cronin, who said he suffers from post-traumatic stress disorder after serving overseas, complained that Oshkosh managers change shift start times in defiance of union objections. Union members said they have more than 2,000 grievances outstanding against the company, Cronin said, including alleged abuses of the Family Medical Leave Act.

Company spokesman John Daggett said the number of grievances is part of normal process and "not reflective of our good relationship with the union and its members." The company has recently hired additional human resources staff to help resolve outstanding problems, he said.

"But really, my issues are one small pinhole in a much bigger wall," Cronin said. "The bottom line in all these conversations is that many of us just don't trust management."

(Editing by Mike Williams and Chris Kaufman)

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Insight: America's rich losing tussle with taxman

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1 of 5. A luxury car is parked on Monte Carlo Casino square in Monaco, which is lit for holiday season, December 7, 2010.

Credit: Reuters/Eric Gaillard

By Chris Vellacott

LONDON/NEW YORK | Fri Sep 30, 2011 12:51pm EDT

LONDON/NEW YORK (Reuters) - When Irish rockers U2 took to the main stage at this year's Glastonbury music festival, a small but vocal group of activists raised a large balloon emblazoned with the words "U Pay Tax 2?"

Most people in the 60,000-strong crowd barely noticed the stunt on a rain-lashed night, but the world's media latched on to the protest and gave it prominent mention in their reports of the eagerly awaited performance by one of rock and roll's biggest acts.

Years ago the band transferred some of its assets from Ireland to the Netherlands, as did members of the Rolling Stones, prompting the New York Times to label the Netherlands "The New Tax Shelter Hot Spot."

U2's music triumphed on that muddy June night, but the tax habits of the world's super-rich have since become a hot topic.

Cash-strapped western governments are on the offensive against their own elites. Wealth taxes are up, loopholes are being closed and crackdowns on offshore havens and Swiss bank accounts are gaining momentum.

"Flogging the rich always becomes a national sport in times of crisis," says Catherine Tillotson, managing partner at consultancy Scorpio Partnership.

Some super-rich are volunteering funds: billionaires Warren Buffett and L'Oreal SA heiress Liliane Bettencourt recently made statements offering to shoulder more of the tax burden.

In the United States, President Barack Obama has called for a new minimum tax called the "Buffett Rule" for American households that make more than $1 million annually. A recent USA Today/Gallup poll showed 66 percent of Americans support increasing income taxes for wealthy individuals.

Proposed changes to the U.S. tax code may not materialize soon -- the proposal is a "political statement and not a serious legislative proposal," said Scott A. Hodge, president of Washington-based research group the Tax Foundation.

But the debate and recent moves have underlined a longstanding truth: it is much harder for wealthy Americans to avoid taxes than for their European counterparts.

"You are definitely better off not being American," said John Christensen, director at Tax Justice Network, which campaigns against tax havens.

NO ESCAPE

U.S. citizens are liable to U.S. tax wherever they are in the world, making it virtually impossible for them to become legal tax exiles -- a possibility open to Europeans, many of whom have set up home in tax havens like Monaco and Britain's Channel Islands.

Americans cannot even escape these obligations by renouncing their citizenship, says Sydney E. Unger, a partner in the tax department of New York law firm Kaye Scholer LLP.

"If you want to renounce...you have to file tax returns for (the) last five years, and there is now an imposed exit tax. If you have a lot of assets, you have to pay tax on them as if you had sold them," he said.

Since the 2008 financial crisis, tax advocates say, America has been very effective at cracking down on illegal tax-dodging by people who take cover under banking secrecy rules to hide their fortunes in offshore financial centers like Switzerland.

"The U.S. has been chasing banks. They have an awful lot of data and they've been arresting people, charging them and indicting them -- very publicly indicting them and their lawyers. It's a very robust response and it's had a remarkable effect," said Christensen.

In 2009, a U.S. investigation into UBS resulted in a $780 million fine for the Swiss bank, which agreed to disclose more than 4,000 U.S. client names to the Internal Revenue Service and Justice Department.

Other European-based banks, including Credit Suisse and HSBC, and some of their clients, have more recently come under scrutiny in American probes.

Indeed, some banks have found offering offshore banking services to Americans such a regulatory headache that they stopped taking Americans on. HSBC's private bank said earlier this year it would no longer cater to American millionaires outside the United States.

"There are very few tax shelters left," says Martin Goldblum, chairman of the tax department at the New York law firm Troy Gould, which services super-rich clients.

LAST BASTION FALLS

The last real bastion of U.S. tax avoidance closed on September 9, the final day of an IRS tax amnesty window for Americans to declare foreign bank accounts.

This program, the second since 2009, allowed individuals who had not properly disclosed accounts and income earned abroad since 2003 to come clean, pay up their back taxes and penalties and file correctly in future.

The IRS said that as of September it had collected $2.7 billion from thousands of U.S. taxpayers. Among them were immigrants who kept holdings in their mother countries, people in the entertainment industry who earned money internationally, people with vacation homes in foreign countries and even some cases of people who had inherited accounts of which they were previously unaware.

Kaye Scholer's Unger stressed that these were often the reasons some Americans hadn't declared such income, countering a perception that all tax evasion was intentional and criminal.

"There's this feeling that it's only people who are trying to hide their money," he said. "On one of these accounts, I told the IRS agent, 'The reason they didn't tell you about the account is that they didn't know about it.'"

His client had inherited a $2 million account from a relative who had left Europe after surviving the Holocaust, and received a letter from UBS saying that as part of an investigation, the bank might release the names of U.S.-based account holders. That client ended up with a reduced penalty of 5 percent, or about $100,000, rather than the 20-25 percent typically charged.

"You can never say he's happy about that penalty," said Unger. "He came to the conclusion that these were the rules. He had an account at UBS. He didn't know if his name would be turned in. He wanted to clear things up and go forward with his life."

The highest penalty Unger has dealt with so far was $870,000, on an account of $4.35 million.

BRITISH BOLTHOLE

Billionaires in Europe -- and in Britain particularly -- can find it easier to escape the taxman's grasp.

Britain has the world's fifth-largest number of millionaires after the United States, Japan, Germany and China according to research published in June by Merrill Lynch and Capgemini.

But attempts by governments in Europe and Britain to crack down on tax evasion since the financial crisis have been noticeably gentler than those of the United States.

"The UK authorities are understaffed and don't have the latest technology," said the Tax Justice Network's Christensen.

In August, Switzerland and the UK did a deal to tax funds kept by British residents in secret Swiss bank accounts. It targeted just 5 billion pounds ($7.8 billion) in extra tax revenue, which critics say is a tiny fraction of what could be clawed back if the real extent of undeclared money was revealed.

"It's shocking. It's shabby," said Christensen.

Ronnie Ludwig, a partner in the private client team at accountants Saffery Champness, agreed the UK could have gone further if it was engaged in more vigorous pursuit.

"The actual figure that could come in ... would be significantly higher," he said.

The UK also permits residents with an often tenuous link to a foreign country to remain 'non domiciled' for tax purposes, which means they are not liable for money accumulated abroad, as long as it stays overseas.

This 'non-dom' status has helped turn London into an effective tax haven for thousands of rich foreigners, from Russian and Arab oil billionaires to global industrialists who earn most of their wealth outside the UK.

London's community of super-rich foreign-born residents includes Roman Abramovich, the Russian owner of Chelsea football club, and metals magnate Lakshmi Mittal, CEO of ArcelorMittal.

The UK has made an effort to force non-doms to pay more tax. In 2008, the Labour government which lost power last year said they should have their overseas wealth taxed or pay a 30,000 pounds ($47,036) levy after seven years' residence. In March the current government added a further 50,000 pounds after 12 years.

In the words of one financial adviser, the demand is laughable.

"What's the difference now for a Russian oligarch living in the UK? The 30,000 pounds tax? It's a joke ... For him, it's like five pounds for me," said the London-based adviser who specializes in super rich families but asked to remain anonymous because of the sensitivity of discussing his clients.

Efforts to target Britain's indigenous, and domiciled, millionaires have been more aggressive. In 2009, the Labour government announced a new top rate of income tax of 50 percent for people earning more than 150,000 pounds per year.

However, the nation's wealthy have lobbied for this to be reduced and a group of high profile economists urged Conservative finance minister George Osborne to ditch the 50 percent rate "at the earliest opportunity", in a letter to the Financial Times earlier this year.

Britain's Treasury has said that Osborne regards the tax as a "temporary measure" though the Conservative's junior partners in a ruling coalition, the Liberal Democrats, are resisting a cut in the top rate given the unhappiness of working and middle-class voters hit hardest by government austerity measures.

Whatever the American millionaire's tax burden, seeking alternative citizenship is not an option Kaye Scholer's Unger recommends to his clients: there are benefits to being a U.S. citizen that other nationalities, however rich, do not enjoy.

"If you get in trouble, will the Marines come bail you out?" he said.

($1 = 0.639 British Pounds)

(Additional reporting by Jilian Mincer and Beth Gladstone in New York and Mike Collett-White in London; Editing by Sara Ledwith and Sophie Walker)

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