BROKEN GLASS AS COMPETING UNIONS CONTEST CONTROL

UNCLAS SECTION 01 OF 04 MEXICO 002017

SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON EIND SOCI PGOV PINR PHUM MX
SUBJECT: BROKEN GLASS AS COMPETING UNIONS CONTEST CONTROL
OF BEER BOTTLE FACTORY

REF: REF: (A) MEXICO 0013 (B) 07 MEXICO 3444


1. Summary: An extended dispute over which one of two
unions would represent the workers at a beer bottle plant in
the northern Mexican state of San Luis Potosi (SLP) now
appears to be over. The plant in question employs some 800
unionized workers and the two unions involved are the CROC
(Revolutionary Confederation of Workers and Peasants) and the
SUTEIVP (Sole Workers Union of the Potosi Glass Bottle
Industry). The plant belongs to Grupo Modelo, which
reportedly controls over 50 percent of the country,s
domestic beer market and who,s internationally known
&Corona8 is one of the best selling beers worldwide. The
dispute between the two labor organizations began this past
January when, allegedly, the CROC was invited by the plant,s
management to supplant the existing SUTEIVP. The competing
unions both have ties to Mexico,s two main opposition
political parties. According to a group of workers who met
with Mission Mexico,s Labor Counselor, the plant,s
management as well as state and federal labor authorities
turned against them when the SUTEIVP negotiated a 19 percent
salary increase that they feared would become the standard of
reference for other unions. This wage increase significantly
exceeds the GOM recommended raise of just 4 percent for 2008
(Ref). Consequently, these workers said, a concerted effort
was made to replace the SUTEIVP. Depending on one,s
perspective, the situation at the beer bottle plant could
either be seen as a deliberate case of union busting or an
instance where a private company took (mostly) legal actions
to maximize its returns. End Summary.


UNION CONTRACT KEEPS CHANGING HANDS
--------------


2. Grupo Modelo is one of the largest beer breweries in
Mexico. Modelo manufactures a variety of beers, the most
internationally famous being &Corona8, and reportedly
controls over 50 percent of the Mexican domestic beer market.
One of the main sources of bottles for the Grupo Modelo
breweries is an in-house glass making plant named Vidriera
Industrial Potosi located in the northern Mexican state of
San Luis Potosi (SLP). Prior to January 2008, the Vidriera
beer bottle plant employed some 800 unionized workers. Up
until late 2006, and for at least ten years prior to that,
the union representing these workers belonged to the CTM
(Confederation of Mexican Workers).


3. Following a hard fought campaign the CTM, which is the
largest labor federation in Mexico, more or less gracefully
accepted its loss in a union election which replaced it with
an &independent8 union called the Sole Workers Union of the
Potosi Glass Bottle Industry (SUTEIVP). It should be noted
that the CTM is formally linked to one of the country,s two
main opposition political parties, the PRI (Mexico,s former
ruling party, the Institutional Revolutionary Party). As an
independent union the SUTEIVP affiliated itself with the
National Workers Union (UNT),the second largest labor
federation in Mexico. The UNT has extremely close ties to
Mexico,s main opposition political party, the PRD (Party of
the Democratic Revolution).


4. In early 2007, shortly after winning its contest against
the CTM to representative the Vidriera workers the SUTEIVP
successfully renegotiated the then existing collective
bargaining contract. From the union,s point of view the
renegotiated contract was extremely successful in that it
granted the workers an unprecedented 19 percent wage
increase. The new contract greatly exceeded the GOM,s
recommended wage increase for 2008 of 4 percent (Ref). Thus
far in 2008 few, if any, unions have negotiated a combined
wage and benefit package that has exceeded 6 or 7 percent.
Thus, although the SUTEIVP achieved something no other union
in Mexico has been able to accomplish it may well have been a
pyrrhic victory. By the end of 2007 the management of
Vidriera Industrial Potosi decided changes were needed. On
December 10, 2007 the plant,s management announced that for
a variety business reasons it would have to fire somewhere
between 200-250 workers. This announcement began a series of
events, which, in mid-May 2008, ultimately resulted in a
third union now being declared the legal representative of
the Vidriera Industrial Potosi workers.

MEXICO 00002017 002 OF 004




5. The new union representing the Vidriera workers is
affiliated with the CROC (Revolutionary Confederation of
Workers and Peasants). The CROC is the third largest labor
federation in Mexico. Until 2006 the CROC was formally
linked to the PRI but since then claims that will seek
political alliance with whatever party that is prepared to
help promote the interests of its union members. In SLP that
has meant being linked to Mexico,s current ruling National
Action Party (PAN). Overall the USG has had a positive
relationship with the CROC which has received funding from
both USDOL and USAID for its work in combating the child
commercial sex trade. That said, like many large
organizations, the CROC has both its good and bad elements.


A COMPLICATED LABOR TALE CHANGES WITH EACH TELLER
-------------- --------------


6. The details of the events which led to a third union
representing the Vidriera Industrial Potosi workers in as
many years varies greatly depending upon the source of the
information. There are at least three different versions of
what transpired at the SLP beer bottle plant. The differing
versions of events come from (a) the Vidriera plant
management; (b) the SUTEIVP; and (c) GOM federal and SLP
state labor authorities.


7. The Company,s Side: According to the Vidriera Industrial
Potosi plant managers, any problems in SLP are the result of
the union,s failure to understand current economic realities
and a rejection of legitimate company offers to fully comply
with Mexican Federal Labor Law. Vidriera Industrial Potosi
asserted that the December 10 announcement came after a
realistic analysis of harsh economic conditions that forced
it to shut down one of its glass making ovens and
significantly reduce staff for sound business reasons. Of
the approximately 800 unionized workers at the beer bottle
plant the company took steps to fire somewhere between
200-250 employees. The initial reason given for this cutback
in production and staff was that the company was compelled to
downsize in order to deal with the consequences of low sales
and reduced profits. Interestingly, when workers and the
SUTEIVP questioned the company,s claim of low sales as the
reason for the downsizing, they said the reason given by the
company then changed to a claim that the oven was being shut
down for extensive maintenance and then changed again to an
assertion that low international exports were hurting the
bottle plant,s bottom line. It is difficult to judge the
validity of any of these claims. That said, once the company
announced the staff reductions it also offered those losing
their jobs a severance package, called &liquidation8, that
it averred was fully consistent with established Mexican
Federal Labor Law.


8. The Union,s Side: The SUTEIVP states unequivocally that
Vidriera company management decided to break the union once
it saw that it would not be as complacence as its
predecessor, the CTM. In order to bolster this assertion,
lawyers and various spokesmen associated with the union
presented information which they claim shows that the reasons
given for the announced staff reductions were false. Perhaps
the most telling argument made by the SUTEIVP against the
company management,s claim of harsh economic conditions
compelling sharp staff reductions were the February 2008
reports, in both Mexican and US newspapers that Grupo Modelo
was building a USD 280 million bottle making plant in the
nearby Mexican state of Coahuila. It should be noted that
post has previously reported on what could be described as an
excessively pro-business slant of both the Coahuila state
government and the dominant union there, the CTM (Ref B).


9. SUTEIVP spokesman have also pointed out that from
2000-2006 Grupo Modelo as a whole grew 5.14 percent and that
international exports rose 11 percent per year.
Interestingly, Grupo Modelo does not dispute these figures
but does claim that the growth of the company and the
business success of the Vidriera Industrial Potosi beer
bottle plant are not one and the same. The SUTEIVP also
points out that among the 200 plus persons fired to date are
every single member of the union,s executive committee plus
every single person who served in any capacity as a union

MEXICO 00002017 003 OF 004


official. Finally, in a meeting in Mexico City with Mission
Labor Counselor a group of fired workers asserted that the
Vidriera management had received tacit support from GOM
federal and SLP state labor authorities to fire anyone
closely associated with SUTEIVP because they feared that the
generous 19 percent wage increase negotiated by the union
might become the new standard of reference in contract
negotiations in the state and throughout Mexico.


10. The GOM,s (Federal and State) Side: The SUTEVIP has
sharply criticized the role of GOM state and federal labor
authorities for their actions or lack thereof in the events
that took place at the Vidriera beer bottle plant. The
authorities, at both the federal and state level, assert that
they have scrupulously applied Mexican Federal Labor law. To
begin with, the authorities assert (correctly) there is no
legal reason why Grupo Modelo cannot reduce staff and/or
build a new bottle plant elsewhere in Mexico as long as it
does so in accordance with the law. In this case that means
that the Vidriera management would have to pay the severance
package, or &liquidation8 required my law. The authorities
have pointed out that the company did offer liquidation as
required and at least 100 of the fired workers have accepted
the package.


11. The SUTEVIP claims that the authorities have imposed a
new management friendly union (the CROC) on the Vidriera
workers. In response, the authorities claim that as a result
of the clear and ongoing dispute between SUTEVIP and Grupo
Modelo some of the workers independently organized to invite
another union to represent them. The authorities claim they
simply responded to a request from the workers to give them
an opportunity to choose their representation. Consequently
the authorities organized a union election on May 9, 2008
which the CROC won.


12. The claims by the authorities sound reasonable but
credible press reports have undercut some of the statements
by GOM state and federal labor officials. Among the possible
irregularities was the fact that the CROC was allowed to
campaign inside the factory which SUTEVIP supporters were
prevented from entering the plant at any time by both state
and federal police. The authorities were legally required to
inform both of the competing unions that they had been
approached, supposedly by unhappy workers, with a request to
hold new elections. The SUTEVIP claim that they were never
officially informed by the labor authorities of the decision
to hold new union elections. The authorities appear to have
rushed to certify the CROC as the new representatives of the
Vidriera workers without waiting for a court ruling on the
appeal filed by SUTEVIP to invalidate the election because of
the above mentioned irregularities.

DEPOSED UNION HAS NATIONAL AND INTERNATIONAL SUPPORT
-------------- --------------


13. The situation at the Vidriera Industrial Potosi beer
bottle plant had generated considerable national and even
some international support for the SUTEVIP. Nationally at
least 16 other unions affiliated with the UNT have come out
to support the SUTEVIP and to condemn Grupo Modelo and the
GOM state and federal labor authorities. Internationally the
SUTEVIP it is also being supported by the AFL-CIO affiliate
the Glass, Molders, Pottery, and Plastics & Allied Workers
International Union (GMP). A US and Canadian delegation of
GMP members recently traveled to San Luis Potosi following
which they met with Mission Mexico Labor Counselor to protest
the situation that has occurred at the Vidriera beer bottle
factory. The GMP delegation advised Labor Counselor that
they would be discussing the San Luis Potosi situation with
their membership and contacting their elected representatives
in their respective to lobby for more international
involvement against what they said was a clear case of union
busting.


COMMENT
--------------


14. Barring a court approval of the appeal to invalidate the
union election because of process and voting irregularities,
the CROC is now the legal representatives of workers at the

MEXICO 00002017 004 OF 004


Vidriera Industrial Potosi beer bottle plant. It will
probably be difficult for the SUTEVIP and it supporters to
prove that Grupo Modelo intentionally set out to bust the
union but as things now stand that will be the clear end
result. Nevertheless, even by local standards, it is very
suspect to have union representation in a factory change
hands three times in three years. Under current Mexican
Federal Labor Law it does not appear as if Grupo Modelo did
anything (obviously) illegal. The company was/is certainly
free to move or rearrange its operations in any way it sees
fit as long as it meets its legal obligations to any fired
workers; which it apparently did. The AFL-CIO, its affiliate
and the Mexican unions supporting the SUTEVIP can probably
make a compelling argument about the ethics of what happened
at the beer bottle factory in San Luis Potosi but legally
there appears to be little that can be done other than to
await the decision of the now deposed union,s court appeal.


15. This message was cleared by 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 /
GARZA