AT&T (NYSE: T) cannot fire workers it does not want. Sony (NYSE: SNE) easily can fire its unwanted workers. Leverage is at the heart of employee power, now that the recession has ended and companies do not have to dump workers indiscriminately. This is on display nowhere more than with these two companies.
The Communications Workers of America represent 40,000 workers who could strike AT&T over slow labor negotiations. Each side has elected to continue beyond a deadline. The workers are part of AT&T’s legacy wireless business, which services homes throughout America. Many of the people in those homes have turned to VoIP and cellular devices. AT&T probably would like to dump thousands of these workers. It cannot because the ever-shrinking landline business would shrink even faster without customer service. AT&T’s alternative is lower pension contributions and higher contributions for health care from workers.
Sony’s profits have been dead for nearly four years. New management needs to show the markets that the company can be profitable once again. Its lines of revenue will not recover for years, if they recover at all, which leaves Sony with few options. The Nikkei reports that Sony will cut 10,000 people. None is in unions. Almost all jobs cut are likely to be in divisions that have posted large losses. Sony management believes the firm’s future in gaming, smartphones and content. Much of the balance of the company will be jettisoned or cut to the bone.
The difference between AT&T and Sony is not really between an American company and a Japanese one. The difference is between those operations are essential and those that are not. AT&T executives know that the firm’s landline division has no real future. However, it is a huge part of sales, so labor problems at the division could drive AT&T’s earnings to a loss. Sony already loses money on the operations it plans to cut.
With the end of the recession, most wholesale downsizing is over. Layoffs will now become more surgical. Management can to pick which people to fire now that the overall economy, and earnings, are no longer imploding.
Douglas A. McIntyre