AT&T wants to cut union wages & benefits. Strike is possible.

AT&T, the largest employer of union workers in the US, is renegotiating contracts that cover 112,500 workers, and seeks to take advantage of the recession to reduce its health care costs. Five regional union contracts expire on April 4. A sixth that expires a few months later is being negotiated at the same time.

The last time this batch of contracts was up for negotiation, five years ago, there was a four-day strike that was seen as a minor victory for the Communications Workers of America. But this time, the economic meltdown has shifted the balance of power decidedly toward the employer.

The contracts cover AT&T's shrinking wired phone business, rather than the growing cellphone division. AT&T wants concessions on health benefits, saying the wireline workers pay far fewer of their health care costs than employees on the mobile phone side. Retirees' health benefits are also likely to be affected. AT&T spends $5.5 billion a year on health care; its 2008 revenue was $124 billion.

UBS analyst John Hodulik wrote last week that a strike is likely, but that the company would come out on top. Management employees have received extensive training to keep the company running if there is a strike, he said, and AT&T could reap large savings on its health care costs.

Not only is the threat of job losses sharper in the current economy, said Sanford Bernstein analyst Craig Moffett, the union war chest is likely also badly depleted by the weak stock market. Unions in general also aren't very popular since they're getting some blame for the troubles of the auto industry. Ford, General Motors and Chrysler have negotiated concessions from their unions.

Since the last contract negotiation, cable companies, with a largely nonunion work force, have grown into a formidable competitor for home phone customers. Comcast announced last Wednesday that it was the third-largest provider of home phone service in the country, surpassing Qwest.

AT&T spokesman Walt Sharp said the workers covered by the expiring contracts pay 8 percent of their yearly health care costs, compared to the national average of 34 percent. Their total health care costs are also higher because the benefits structure doesn't promote responsibility, he said.

Meanwhile, AT&T employees are well paid, compared to the competition, Sharp said. A 2007 survey by the Bureau of Labor Statistics puts the hourly wages of phone company line installers and repairers at $26.80 per hour, compared to $19.50 per hour at cable companies.

Sharp also emphasized that AT&T in general has a good relationship with its unions. Of its 300,000 employees, 160,000 are unionized. It's the only wireless carrier with a large union work force. (info from The Associated Press)