Caterpillar signs tentative deal with striking workers

Wed Aug 15, 2012 5:22pm EDT

A welded steel CAT logo is seen on a Caterpillar tractor scraper at Holt Caterpillar, the largest Caterpillar dealer in the United States, in San Antonio, Texas March 19, 2012. REUTERS/Richard Carson

A welded steel CAT logo is seen on a Caterpillar tractor scraper at Holt Caterpillar, the largest Caterpillar dealer in the United States, in San Antonio, Texas March 19, 2012.

Credit: Reuters/Richard Carson

(Reuters) - Caterpillar Inc (CAT.N), the world's largest maker of construction equipment, said it has signed a tentative, 6-year agreement with workers at a plant in Joliet, Illinois, to end a nearly 4-month-long strike.

The deal still needs to be approved by the union's roughly 800 workers, and a vote is scheduled for Friday.

If approved, each union member will receive a $1,000 ratification bonus, according to Marion Modesitt, a union member who has seen the contract.

Workers will not return to the plant, which makes hydraulic parts for much of Caterpillar's construction equipment, until the contract is ratified, a company spokesman said.

A representative of the International Association of Machinists and Aerospace Workers confirmed a tentative deal had been reached, but declined to comment on the details.

The strike began on May 1, when the union rejected an initial contract that would have included a $5,000 ratification payment for each union member and participation in the company's annual bonus plan.

Union members rejected the deal because it did not include sufficient pay raises and called for higher health care costs, a union official said at the time.

Caterpillar used office workers and temporary labor to staff the plant, and said production did not dip during the strike.

The company's proposal to the union earlier this year included "market-based wage adjustments" for employees hired over the past seven years. Workers hired before May 2, 2005, would have wages frozen as Caterpillar said they were already paid above-market wages.

The two-tier wage structure offers starting pay of about $14.75 an hour, more than $10 an hour less than many workers hired before that contract were paid.

Caterpillar says the lower rate better corresponds to wages offered at its peers.

The tentative contract announced on Wednesday offers workers hired after 2005 an automatic 3 percent raise annually for the life of the contract.

Workers hired before 2005 will not receive a raise, if the contract is ratified.

The contract also increases health care costs for all employees at the plant.

Marion Modesitt, 58, who has worked at Caterpillar for more than 38 years, said she will vote against the contract.

"They're screwing everybody. We have our lives set on the wages we have now, but our insurance costs are going to double over the life of the contract," said Modesitt.

The Illinois strike follows a high-profile labor dispute that took place late last year between Caterpillar and the Canadian Auto Workers at a locomotive plant in London, Ontario. CAW workers voted down a Caterpillar offer, and the company ended up closing the plant and moving the work elsewhere.

Shares of Caterpillar fell about 0.3 percent to $87.61 late Wednesday afternoon.

(Reporting By Ernest Scheyder; Editing by Gerald E. McCormick, Leslie Gevirtz and Richard Chang)