Oshkosh Victim of its Own Success in Labor Relations?

by: Matthew Potter
August 31, 2010

Category: BAE Systems, Business Line, Companies, Department of Defense, logistics, Oshkosh Truck Corp, production program, States, Texas, U.S. Army, Wisconsin | RSS 2.0

Oshkosh (OSK) the Wisconsin based manufacturer of heavy vehicles including firetrucks, ambulances and trucks for the military has had a rough time of it with the worldwide global economic problems. Demand for their civil products has fallen considerably causing the company in 2009 to lose over a billion dollars. Since then two major military contracts have helped the company turn a profit so far this year.

Oskosh won a contract to provide new, lighter Mine Resistant Ambush Protected (MRAP) for use in Afghanistan. The MRAP proved critical in Iraq as well for defending troops as the moved around the country. The MRAP vehicles purchased by the U.S. military and its Allies tended to be very large and heavy and tended to stay on roads. In Afghanistan the rougher, less developed country side led to the demand for the MRAP-ATV designed to be more maneuverable. Oshkosh won a competitive contest held by the Defense Department and so far has booked over four billion dollars of work related to their M-ATV product line.

Oshkosh was also able to win the Army’s contract to build their standard truck and trailer from BAE Systems (BAE:LSE). The Family of Medium Tactical Vehicles (FMTV) has been in production for almost twenty years for the U.S. military. The Army awarded a contract in 2008 to Oshkosh to keep building the same design at their factories. The Army will be buying thousands of the vehicles to rebuild stocks and replace those lost in Iraq and Afghanistan and Oshkosh will profit from that.

The fact that the company has got back on its feet is not lost on its workforce. Yesterday they through their union, United Auto Workers Local 578, rejected the company’s offer to extend an existing contract another year. The dispute was not about pay and benefits but concerns among the workers as how the company treats issues with “seniority, layoff and recall rights, family and medical leave rights, and overtime”.

Unlike many employers during economic downturns who can demand concessions from their workforce to help keep up the number employed Oshkosh is facing the opposite situation. Due mainly to the two military orders the company is reopening plants and hiring workers many of whom are former employees. Once the economy does start to get back on its feet there may be even more demand from the company to hire.

Of course many defense contracts have a definitive end or as Oshkosh demonstrates may be moved to another supplier. Oshkosh’s workforce may be recognizing that in five or ten years they could be in the same situation as BAE’s workers in Sealy, TX. A contract that contains protections for seniority, layoffs and other work rules will certainly be more protective of their long term employment then one that gives them a decent rise in wages or benefits. A good paying job is only as good as long as you have it.

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