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Cablegate: Auto Industry Labor Dispute Resolved Despite, Not

VZCZCXRO7118
PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #5406/01 2841605
ZNR UUUUU ZZH
P 111605Z OCT 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 9175
RUEHKO/AMEMBASSY TOKYO 0473
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 03 MEXICO 005406

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILSCR, WHA/MEX FOR DDARRACH, USDOL FOR
ILAB

E.O. 12958: N/A
TAGS: ECON ELAB ETRD PGOV PINR MX
SUBJECT: AUTO INDUSTRY LABOR DISPUTE RESOLVED DESPITE, NOT
BECAUSE, OF COMPANY,S CODE OF CONDUCT

1. SUMMARY: A month,s long auto industry labor dispute was
recently settled when the company, Fujikura Automotive
Mexico, reached an agreement with disgruntled workers in the
northern Mexican state of Coahuila. The dispute began this
past June when Fujikura announced plans to layoff its entire
workforce, void a collective bargaining agreement, and rehire
the same workers at lower wages. When the workers objected
to being paid less for the same job both the local
authorities and some of their own union leadership attempted
to convince them that taking a lower salary was better than
no salary at all. The disgruntled workers were supported in
their dispute by a labor organization called the Border
Workers Committee (CFO). The CFO has close ties to the
AFL-CIO and because of this it was accused of being an
outside agitator working for organized labor interests in the
U.S. Ultimately the workers settled for less than they had
hoped but more than Fujikura wanted to pay. For the most
part their claims closely followed Mexican Federal Labor and
local customs which made it difficult for Fujikura to accuse
them of making unreasonable demands. In the end a settlement
was reached because the workers received the support of CFO,
some of their lower level union leaders and the help of an
outside negotiator. Appeals by the workers and their
negotiator to the company,s Code of Conduct, the tool often
pointed highlighted as a mechanism for softening the harsher
aspects of global competition, appear to have played no real
role in resolving this dispute. END SUMMARY


THE COMPANY WANTS A NEW DEAL
----------------------------
2. In June of 2007 a protracted labor dispute erupted in the
city of Piedras Negras in the northern Mexican state of
Coahuila when the company, Fujikura Automotive Mexico,
unilaterally attempted to cut its labor. Fujikura Automotive
Mexico is part of a Japanese owned corporation with
operations in Asia, Mexico and the US. In the US the
corporation, Fujikura Ltd, owns two subsidiaries: Fujikura
America Inc. and America Fujikura Ltd. In its plant in
Piedras Negras, Fujikura produces automotive wire harnesses
for Suburu,s Tribeca; Toyota,s Tundra, Camry and Corolla;
and Chrysler,s Jeep Wrangler.
3. The Piedras Negras plant was owned by Alcoa until late
2005. Prior to that time, Fujikura and Alcoa operated a
joint venture in Piedres Negras called Alcoa Fujikura Ltd for
many years. When ownership of the plant passed solely to
Fujikura in 2005 the company pledged to honor the workforce's
existing contract. Unfortunately for the workers, shortly
after taking over the plant Fujikura decided that its pledge
was too expensive. Discussions with the plant,s workers
aimed at releasing Fujikura from its pledge dragged on but
with unsatisfactory results from the company,s perspective.
Consequently, Fujikura announced plans to layoff its entire
workforce of 725 employees, void the existing collective
bargaining agreement, and rehire the same workers under a new
less expensive contract.
THE WORKERS RELUCTANTLY AGREE BUT (
-----------------------------------
4. Not surprisingly the workers resisted the idea of
abandoning the existing collective bargaining agreement,
especially when that meant working at the same jobs but with
reduced wages. When confronted with this situation the
workers, who belong to the Confederation of Mexican Workers
(CTM), turned to their local union leadership for guidance.
The position of the senior union leadership in Piedras Negras
was that a job with lower wages was better than being jobless
and with no wages at all. Over time the local union
leadership persuaded the workers to take the deal. The
workers reluctantly agreed to accept a new contract with
lower wages but they had a condition.
5. From the workers, perspective they were being fired from
their jobs and as such they felt they should be formally
&liquidated8 and given the full benefits of a liquidated
employee under Mexican Federal Labor Law. Mexico Law
requires employers to pay a substantial severance packaged
called &liquidation8 whenever an employee is let go from
their job. (Note: Liquidation consists of three month wages
plus a complicated formula based on an employee,s years of
service. Employers are legally required to pay liquidation

MEXICO 00005406 002 OF 003


whenever an employee is dismissed regardless of whether the
worker has already arranged subsequent employment.)
6. In addition to the liquidation benefits the workers also
insisted on receiving an additional 20 days of salary for
every year of seniority. The 20 days payment is not/not
legally required under Mexican law but such payments had been
routinely made by Alcoa whenever an employee was laid off due
to workforce reductions. Fujikura refused to pay the
additional 20 days salary and a protracted labor dispute
began.
WORKERS DISAPPOINTED WITH UNION LEADERSHIP SEEK OUTSIDE HELP
--------------------------------------------- --------------
7. To the surprise and disappointment of the workers, their
senior union leadership at both the state and local level, as
well and the Piedras Negras city government, sided with
Fujikura against them. Various attempts, accompanied by
petty harassment from the union leadership and the city
government, were made to compel the workers to accept
Fujikura,s offer of a new lower wage contract but without
liquidation and without the 20 days pay. At one point
Fujikura threatened to simply fire the workers without even
paying the liquidation benefits if they did not accept the
company,s original offer. (Note: Fujikura,s threat was an
empty gesture. Mexican federal labor authorities would
certainly have compelled the company to pay the legally
mandated liquidation benefits and there is no doubt that the
workers were aware of this.)
8. Abandoned, from their perspective, by their senior union
leadership the workers sought and found outside help. The
help came from two sources, an organization called the Border
Workers Committee (Comite Fronterizo Obrero -- CFO) and a
local labor lawyer closely tied to Mexico,s main opposition
political party, the Party of the Democratic Revolution
(PRD). The help the workers obtained from the CFO and the
labor lawyer added a new and complicating dimension to the
dispute.
9. The CFO is an organization which describes itself as
being dedicated to educating Maquiladora (foreign owned
assembly plants) workers about their rights and supporting
worker efforts to build more democratic unions. The CFO says
it works all along the US/Mexico border but it appears that
its efforts are mainly focused in the state of Coahuila. For
at least the past six years the CFO has received considerable
support from the AFL-CIO. Because of this the organization
was accused of being a tool of American organized labor
interests whose sole function in Mexico was to serve as an
outside agitator. In response the CFO repeatedly pointed out
that its staff were all Mexican citizens exercising their
right of freedom of association. Because of the labor
lawyer,s close ties to the PRD he was accused of trying to
create political unrest in the city of Piedras Negras.

A FUJIKURA CODE OF CONDUCT?
---------------------------
10. The CFO and the labor lawyer both made extensive use of
Fujikura,s code of conduct in supporting the workers in
their struggle with the company. Fujikura,s code of conduct
states: "While contributing to the betterment of society, we
at Fujikura shall continue to strive to earn societal
recognition as a good corporate citizen, and shall not only
conduct ourselves in accordance with not only the letter and
spirit of all laws, but also act in conformance with the
ethics and morals of society at all times and in every
situation." The use of the Fujikura,s code of conduct does
not appear to have had much impact on the company but it did
gain the workers some unexpected support.
11. As the labor dispute which began in June dragged on into
late August some lower officials of the CTM began to distance
themselves from their senior leadership. It is extremely
rare in Mexico for lower level union officials to take public
positions that differ from that of their senior leadership
but in this case they were persuaded by the workers, the CFO,
the labor lawyer and the discordance between Fujikura,s code
of conduct and its actual behavior in Pedras Negras.

IN THE END IT WAS ALL DOLLARS AND CENT
--------------------------------------
12. The high principals of Fujikura,s code of conduct
notwithstanding, the dispute between the company and its
workers was ultimately resolved through negotiation and a
hard calculation of dollars and cents. Although Fujikura

MEXICO 00005406 003 OF 003


claimed economic necessity compelled it to break its pledge
with regard to the pre-existing collective bargaining
contract and to resist the liquidation plus 20 days the
workers were demanding, this claim did not hold up to close
scrutiny. According to a variety of media sources,
Fujikura,s Coahuila plant was a profitable operation even
before the company decided to lower its labor costs by
getting out of its collective bargaining agreement.
13. That profitability ended when the labor dispute began.
By early September both the company and the workers were
feeling the financial pain and serious negotiations finally
began. In the end Fujikura agreed to pay the full
liquidation benefits and offered an additional compensation
of approximately USD 400,000 in lieu of 20 days the workers
were demanding. This added compensation amounted to roughly
4.5 additional days of wages for each worker or 22 percent of
their original demands. The workers accepted the new
Fujikura offer and dispute formally came to an end of
September 16.

COMMENT
------
14. One of the devices frequently pointed to as a tool to
soften the harsher aspects of global competition is the
corporate code of conduct. It is, of course, impossible to
generalize but in this particular case the corporation in
question appeared fully prepared to ignore its code of
conduct when it believed that by doing so it stood to achieve
considerable financial gain. Again, in this particular case,
what mattered most was a desire by the company to return a
profitable operation to profitability. Judged on that basis,
what ultimately enabled the workers and the company to reach
an agreement was a willingness (caused buy financial needed)
on both sides to sit down and seriously negotiate.
15. This message was cleared with AmConsul Nuevo Laredo and
AmConsul Monterrey.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
BASSETT

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