A Vote for Life

Through the gates of the high-school football field in South Bend, Ind. one sunny day last week streamed 8,500 Studebaker Corp. employees, all members of C.I.O. United Auto Workers Local 5. They had come to decide on a matter of life and death for Studebaker and a matter of considerable importance to themselves. The company had lost $8,925,800 in the first half of this year, was still suffering heavy losses. To turn the tide, Studebaker asked the union to take a 14% cut in wage rates.

The final vote was a triumph for Studebaker Chairman Paul Hoffman and President Harold Vance, and a vindication for Louis Horvath, president of Local 5. By a margin of better than eight to one, the workers agreed to take the pay cuts.

Out of Line. Studebaker first called in Horvath and his bargaining committee eleven weeks ago, let them take a look at the company's books. Sales were down two-thirds from 1953. Executives had taken pay cuts of 20% to 30% on salaries above $20,000. Other operating economies had been made. But these savings, said Hoffman and Vance, were not enough.

They pointed out that Studebaker was paying its employees an average hourly rate of $2.39, v. the $2.03 average paid by its competitors in the auto industry. Furthermore, man-hour output in some Studebaker divisions was as much as 20% below that of other automakers, fringe benefits were higher, and an antiquated seniority clause had cost the company $789,000 in the first four months of 1954. Obviously something more would have to be done. Horvath & Co. were convinced, and in 26 meetings and 150 negotiating hours, hammered out a new contract calling for a wage cut. Said Horvath: "This was the hardest thing that we labor leaders ever had to do." But when a meeting of local members was called a fortnight ago, unexpected opposition to the plan popped up. Horvath was greeted by jeers and catcalls, and the new contract was turned down in a show-of-hands vote (TIME, Aug. 16). The decision stunned Studebaker and South Bend.

Next day, Studebaker gave the union a 60-day notice of contract termination. In full-page newspaper ads, the company made its case more pointed, disclosed that it had been selling cars below cost since June. As a result, sales had jumped 68%.

New Mandate. Soon the light began to dawn on Studebaker workers. Horvath began getting phone calls from union members complaining about the vote; half a dozen petitions, each bearing 75 to 100 signatures and asking for reconsideration of the proposal, landed on his desk. He called an emergency session of his 20-member executive committee, and another membership meeting was scheduled. When the rank-and-file turned out to vote on the wage cut last week, their changed temper was obvious. Warned one opponent: "This is a deal you're going to have to live with for a long time." Replied a heckler: "At least we'll be living."

If the wage-cut vote was good news for the company, Studebaker had some even better news for its workers. With costs lowered the company plans to put present employees, now working about halftime, on a 40-hour week. And next year's cars, said Hoffman, will not only be flashier and more powerful, they will be about $100 lower.

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