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SCHENECTADY DIGITAL HISTORY ARCHIVE

Agreement (1953) Between American Locomotive Company and United Steelworkers of America (CIO) Local 2054

Go back to: Part I: Basic Contract | ahead to: Part III: Insurance and Pensions

Part II: Production Plan V. Incentive System

Section 1: Historical Note on Intent and Purpose

The American Locomotive Company, which for over a hundred years has been supplying American Railroads the best possible locomotive power, began in the 1920's to design diesel-electric locomotives. Production of diesels through the second world war had consisted mainly of switching locomotives. After the war, when it became apparent that the diesel-electric locomotive was much more advantageous from an operating standpoint than the steam locomotive, the Company took steps to discontinue steam locomotive production and concentrated all its efforts on this new product. It designed and put into heavy production new diesel road locomotive models which subsequently met with great success. However, during the transition period, when the Company was forced to make heavy expenditures for new machinery, tooling, establish new methods, etc., it became obvious that there was a distortion in labor costs on these new models which would have to be corrected before the Company could successfully meet the diesel production challenge. The Union, recognizing the importance of the Company's success in the new venture, cooperated with the Company in overcoming this hurdle and as a result of Company-Union negotiations in the early part of 1947 a new incentive plan was adopted. This new plan, which came to be known as "Production Plan V. Incentive System", not only substituted shop-wide group incentives for individual and gang incentives, but also established labor costs at a fixed total for each locomotive model.

The basic principles and procedures were first formalized by a letter dated May 29, 1947, which established the new incentive basis in the Diesel Shop but limited it to that productive area.

Eventually, through the medium of Supplemental Agreements of August 15, 1947, June 16, 1948 and March 9, 1951, this incentive plan was further extended.

The basic documents referred to consistently reflect a continuing confidence in the principles and procedures of Production Plan V. and an expressed willingness on the part of the Company and Union to cooperate in attaining the objective of reducing costs consistent with maintaining the Company's competitive position and continuing opportunity for employment in the interest of the future livelihood and job security of employees.

The functional bases and controls of the Plan are twofold:

  1. To reduce labor costs

    It was initially agreed that a total labor figure for the various types of locomotives would control, except where there might be alterations or engineering modifications in design of parts, assemblies or sub-assemblies: in such case, it was agreed that in changes in design resulting in either more or less work, adjustment in prices for this work would be negotiated before changes were made in shop total. A procedure was provided, likewise, for deleted or canceled items of operations. The agreed procedures were set forth in Company's letter of February 12, 1949 to the Union.

  2. To reduce overhead cost

    A maximum objective figure to control overhead, which was held confidential, was reflected in an interchange of correspondence with the Union interests dated June 16, 1948. The factor referred to was plant-wide and varied department by department in its application. It was specifically agreed that the Union-Management Committee negotiations pertaining to indirect labor and overhead factor were limited to such accounts as involve labor, shop personnel, equipment or consumption of material and supplies in overhead accounts used in the shops, which are normally of primary concern to the Union interests and jurisdiction, viz: a/c 35, 36, 38, 41, 42, 43, 45A, 51, 61 and 63.

    The incentive opportunities afforded under the Plan included:

    1. Piece-workers were provided incentives under both controls of the Plan. They shared the total labor payments in their shop according to their base rates and hours worked. Any increase in production per man-hour, thereby producing more units and adding more money to the total group earnings, added to the pay of the pieceworkers. There was no ceiling on earning opportunity for productive effort; also, the fixed allowances for controllable accounts offered an incentive to operate under a fixed amount of money and encouraged the men to work together as a cooperative group on all work in their shop.
    2. Day Workers were provided the incentive to aid piece-workers in building up the total earnings, since, as provided under the "Graduated Bonus Plan for Day Workers", their bonus was keyed to high piece-work earnings. Therefore, every service they could extend through flexibility in over-all operations increased production per man-hour, and, in operating under fixed allowances for accounts, any increase in piece-workers' earnings also increased their own earnings.

      Production Plan V. is at variance with certain phases of the basic contract provisions but it is understood that such variation will not be regarded as a contract violation on the part of either the Company or Union. All provisions of the basic contract, except as modified by Plan V., remain in effect throughout its term.

Section 2 — Reaffirmance of Plan V

In the institution, growth and development of the Plan as briefly referred to in Section 1, agreements were reached and formalized in writing. Such agreements are now operative, except as modified or abrogated by the provisions hereof, and are specifically enumerated as follows:

  1. Letter of May 29, 1947, on institution of Plan V. in Diesel Locomotive Erecting Shop.
  2. Supplemental agreement of August 15, 1947 on principles and procedures of Plan V.
  3. Letter of August 15, 1947 on controlling labor cost figures.
  4. Running record of Union-Management Committee meetings and minutes.
  5. Letter of December 19, 1947, on institution of Plan V. in Diesel Engine Erecting Shop and "Completion Wage Payment Procedure."
  6. Supplemental Agreement of June 16, 1948 extending Plan V. in additional departments.
  7. Letter of June 16, 1948 on controlling overhead cost figures.
  8. Letter of February 12, 1949 on procedure for engineering changes, additions and deletions.
  9. Agreement of January 16, 1950, Part II, Production Plan V. Incentive System.
  10. Supplemental agreement of March 9, 1951, expanding Plan V. to the Ordnance Division and outlining certain specific amendments, modifications and clarification of procedure.

By virtue of the expressed willingness on the part of the Union to continue to cooperate with the Company in attaining the objective of reducing costs consistent with maintaining the Company's competitive position in diesel engines, locomotives and all other Schenectady Plant products, and in view of the mutual desire of the parties to continue the Plan, principles and procedures throughout the term of the present agreement.

IT IS AGREED that the Plan, principles and procedures currently in operation throughout the Plant, and as set forth in the written documents and running record previously specifically stated, will be incorporated, embodied and merged into the agreement signed March 2, 1953 and remain in full force and effect, except as modified herein, throughout the term thereof.

Section 3 — Union-Management Committee

  1. Time spent by the four Union representatives in administrative hours worked at the Plant in connection with the Committee's activity shall be paid for by the Company. They will be paid their base rate, plus weekly productive percentage bonus as will be progressively reflected in the departments to which they are normally assigned. The four Union members of the Committee also shall conform to time card regulations now in effect, except that they will be provided with special time cards that will permit them to punch at any time clock. Overtime as may be required in administrative work at the Plant must be approved and authorized by a desgnated representative of Management.
  2. Meetings of the Union-Management Committee may be called by the Management Chairman and/or Union Secretary. The Committee shall be empowered to negotiate and make final decisions on questions pertaining to the proper functioning of Plan V. A stenographer supplied by Management shall, when called by the Chairman, take a memorandum of the discussion in Plan V. meetings. Copies will be made for the Management Chairman and the Union Secretary. This memorandum will be used to draft the final minutes of the running record and of any understanding reached but will not be final or binding until reviewed, agreed to and signed by the Management Chairman and the Union Secretary.
  3. Where problems before the Committee cannot be settled by an immediate decision, the Committee members may elect to seek further advice or counsel. In case of disagreement, the Management Chairman shall make the decision and the matter may be subject to grievance procedure.
  4. The Chairman will, upon request of the Secretary of the Committee, furnish figures on applied labor per shop per type of locomotive or other Company product and also overhead accounts used in the shops, which are normally of primary concern to the Union interests and jurisdiction, viz: A/c 35, 36, 38, 41, 42, 43, 45A, 51, 61 and 63. The Management Chairman will furnish the Union Secretary the anticipated over-all schedules for three to six months as available and/or as revised. The above information will be held confidential by the Union interests.

Section 4 — Expansion of Plan

By mutual agreement, the Company reserves the right to control and designate the timing of the sequence of expansion of the plan, principles and procedures in all departments, shops, group of shops, or divisions thereof.

Section 4-A — Definitions

The following definitions of terms and "orders" as used in this agreement express the intent and understanding of the parties:

  1. "Company Products" are standard production units manufactured at Schenectady. At present, they are built in three classes:
  2. "Stock Orders" are those issued to cover standard sub-assemblies and parts applicable to Company's standard products.
  3. "Renewal Parts Orders" and "Extra Work Orders" are those issued to cover subassemblies and parts which flow to the Renewal Parts Department, U. S. Government or specific customer.
  4. "Sales Orders" enumerate and list changes, additions and modifications to adapt a standard locomotive during construction to suit customer requirements and if such Sales Orders result in more work, depending upon the nature of such requirements, this additional or extra work only will be paid for, in accordance with Sales Order provisions.

Section 4-B — Sales Order Procedure

Sales Orders in all cases are to be written indicating the deletions from base order and amount of money involved. Sales Order sheets (Form MD-153 Rev.) sent to shop for negotiation are to be made out in duplicate, one copy to be left in shop.

Section 5 — Controlling Labor Figures

The initial controlling labor figures for each type locomotive reflected the reductions over then scheduled labor prices (Sect. 2, "C"). These figures were broken down, by agreement, for each department in the Diesel Chassis Division in which the Plan was instituted, and a percentage downward adjustment for each type of locomotive, component parts and operations thereof was determined, as specifically appears in the running record (Sect. 2, "D").

In expansion of the Plan to the Diesel Engine Division, total labor figures for each type of Diesel engine were specifically negotiated for each shop and subsequently transposed into prices for component parts and operations thereof.

It is agreed that the current adjusted existing piece-work prices outlined above will control but may be further adjusted from time to time by mutual agreement only of the Union-Management Committee in order to enable the Company to maintain its competitive position.

Section 6 — New Facilities, Change in Methods, Etc.

If the Company installs jigs, fixtures or improved equipment or tools, or improves manufacturing methods, as a result of which less work is involved, adjustments in the prices for such work will only be made for the work thereby reduced or eliminated, provided, however, that the earning rate of employees will not be affected on that job. Such adjustments will be negotiated, agreed to and signed by Union representatives, Foreman and the Company's Planning & Wage Rate Department in the Diesel Division or Process Engineering Department in the Ordnance Division. Failing agreement by them, the matter will be referred to the Union-Management Committee, which shall determine adjustments by mutual agreement. In case of disagreement, the Company will institute a fair price based on the above and the matter may be subject to grievance procedure.

Section 7 — New Prices

New or redesigned engines and/or chasses are new models, indicated by a new specification number offered to the trade. Changes to major items such as frames, cabs, hoods, roofs, trucks, contactor compartments, etc., will be subject to the application of the letter of February 12, 1949, unless they are of such extent that they result in a new model (indicated by a new specification number offered to the trade) in which case they will be considered a newly designed chassis. It is agreed that piece-work prices for all new or redesigned units will be established, using comparable existing adjusted piece-work prices, where they are applicable.

Failing agreement as to comparability, the dispute will be referred to the Union-Management Committee and in case of absolute disagreement a fair price will be instituted by the Company. On those new and redesigned engines and/or chasses, a G. O. not exceeding ten units (as determined by the Company) will be issued for construction and normal development to those shops where development is necessary and the letter of February 12, 1949 will not apply during development period. It is specifically agreed that the entire labor covering any units built under a construction development G. O. will be fully compensated by and within the G. O. price as established, except as herein provided. The money to be paid on a construction development G. O. shall be negotiated by the Union representative, Foreman and Planning & Wage Rate Department. Failing agreement on the amount of money to be paid, the matter shall be referred to the Union-Management Committee and in case of absolute disagreement in Union-Management Committee a price as established by the Company shall be instituted and scheduled to the shop. Changes to operations during construction of the units covered by a construction development G. O. which exceed two in number shall be paid by serial or other equivalent method. When the number of units covered by the G. O. is complete, the new design shall be frozen at that point. Construction development G. O.'s on new or redesigned engines and/or chasses will not be issued to shops where development is not required and the letter of February 12, 1949 will apply. Any changes which are made subsequently on a design as frozen shall then be covered by the provisions of the letter of February 12, 1949 (Sect. 2 "H") and the further procedure of February 28, 1949 in the Union-Management Committee running record (Sect. 2 "D").

Where comparable adjusted piece-work prices do not exist covering new or redesigned engines and/or chasses, a rate of 60% over base rate for the piece-worker or gang incentive group will be allowed until a piece-work price is negotiated. If a disagreement in negotiating any price in any department should exist after thorough study and observation by the Foreman, Union representative and Planning & Wage Rate Department representative, it shall be referred to the Union-Management Committee. Union and Company members of that committee shall negotiate in an endeavor to resolve the disagreement and settle the price acceptable to all concerned. In case of absolute disagreement in Union-Management Committee, a fair price based on Article V., paragraph (g) of Part I of the March 2, 1953 agreement, as agreed by Foreman and Planning & Wage Rate Department, will then be instituted and scheduled to the shop. The piece-worker and/or gang incentive group will be allowed this price or a rate of 60% over base rate, whichever is higher.

Where new productive work, other than diesel locomotives, is instituted under Plan V. incentive system, piece-work prices for piece-worker or gang incentive group shall be established in accordance with the provisions of Article V, paragraph (g) of Part I of the current agreement. Any disagreement in negotiating any price in any department shall be subject to the procedure set forth in the preceding paragraph.

Section 7-A — Estimates on Unconfirmed Items, Orders or Bids

In cases where a cost estimate is prepared before the Company releases new work or changes for production, the Diesel Planning & Wage Rate Department and/or Ordnance Process Engineering Department (hereinafter referred to as the "Planning Department") will prepare negotiation sheets for the estimate. When the estimate is prepared based upon complete drawings, the Planning Department will enter preliminary figures on negotiation sheets for each operation involved and labor figures will then be negotiated, agreed to and signed by the Foreman, Union representative and Planning Department representative. These sheets will then be the authorized basis for labor cost figures to be used for the estimate. When work on which such estimates are prepared is then released for production, the drawings shall be issued without changes affecting labor, and piece-work schedules or change sheets issued to the departments involved exactly as signed, which will so notify the shop and steward. It is fully understood and agreed that the terms of the within Section 7-A will in no way modify the procedures and limitations of the letter of February 12, 1949 and the further procedure of February 28, 1949 in the Union-Management Committee running record (Sect. 2 "D").

Section 8 — Overtime

Overtime shall be kept at a minimum, consistent with efficient operation under Plan V. Before employees are requested to work overtime on regularly scheduled work, the Foreman and Chief Shop Steward (or designated union representative) shall agree in writing on the number of men reasonably required to complete such overtime work. If they cannot agree, the matter will be referred to the Plan V. Committee, which shall decide the number of men required. If, after such agreement or decision, an excess number of men are nevertheless assigned by the Company to and do work overtime, the Company shall pay for the excess men worked overtime. The above limitation shall not apply to any overtime other than overtime on regularly scheduled work in Plan V. Shops.

Section 9 — Inventory and Completion Payments

Presently two methods of incentive payments are in effect in the respective departments under the Plan:

  1. Inventory method, whereby work in process is determined at the end of each pay period and payrolls calculated on such basis.
  2. Completion Payment method (Sect. 2, "E" and "F"), whereby authority for payment is a "move order" signed by the foreman and quality inspector on the basis of completed engines or sub-assemblies or parts of locomotives or tanks.

The parties hereto agree that the now currently existing method of payment in the respective departments, either "inventory" or "completion method", will continue to be used as now in effect throughout the term of this instrument unless modified by mutual agreement of the parties.

Section 10 — Graduated Bonus Plan for Day Workers

Day work employees now currently affiliated with production shops under Production Plan V., and those who afterward will become affiliated upon the Plan's expansion, will be paid as currently through the pool earnings and medium of percentages earned by piece-workers, as reflected on "Graduated Bonus Plan for Day Workers" shown below. Day work employees of the "service" and so-called "day work" departments shall receive incentive payment based upon the weighted current experience under Production Plan V. computed on the basis of the previous week Plan V. piece-work earning percentage.

Percentage Earned Over
Piece-workers' Base Rate
Day Workers' Incentive Bonus
Under 60%0%
60%5%
65%6%
70%7%
75%8%
80%9%
85%10%
90%11%
95%12%
100%13%
105%14%
110%15%
115%16%
120%17%

For each additional 5% earned over the piece-workers' base rate, the day worker will receive an additional 1% incentive bonus.

Section 11 — Grievance Procedure Under Plan V

Article VIII of Part I of the agreement shall continue in full force and effect except as modified below:

The parties are in agreement that the previously selected permanent impartial arbitrator, Mr. R. A. Seward, will serve for the term of the contract on all Plan V. grievances which may be submitted to arbitration.

Section 12 — Saving Clause

It is mutually agreed that the Production Plan V., as installed and where expanded, will be at variance with certain phases of the basic contract (Part I) and such variation will not be regarded as a contract violation on the part of the Company or Union; further, that all provisions of the basic contract (Part I), except as affected by Pro, duction Plan V. (Part II) shall remain in effect throughout the term thereof. It is understood, however, that none of the provisions of the Pro, duction Plan V. incentive system qualifies the Union's rights under Articles II and VIII or Management's rights under Article IX of the basic contract, Part I, dated March 2, 1953.

Go back to: Part I: Basic Contract | ahead to: Part III: Insurance and Pensions

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