Telecom & Wireless

Can Verizon Beat the Unions? Putting the Current Strike in Historical Perspective

Strikebreakers are hard at work at Verizon Communications Inc. (NYSE: VZ), some working 12-hour shifts to fill in for some 40,000 union workers on strike since April 13. Verizon is already quite experienced when it comes to strikes by the Communication Workers of America, but there are crucial differences between this strike and the five others since 1971. This time, Verizon looks very well prepared.

In terms of short-term preparation, after streamlining its training process after a two-week strike of 45,000 workers in 2011, the telecom giant was able to organize 10,000 strikebreakers in advance and have them already trained on contingency. That replaces less than a quarter of the striking workforce, but depending on the efficiency of non-union replacements over union labor, it may have Verizon operating at more than a quarter capacity of the strikers during the strike. The very fact that training was set up in advance shows that the strike may be a planned move by Verizon.

More evidence that Verizon came prepared for this strike comes from its latest 10-K:

Labor contracts covering approximately 36,300 employees of our wireline business expired on August 1, 2015. We continue to be engaged in negotiations with our unions regarding new contracts. During the course of these negotiations we could experience lengthy work stoppages, which could adversely affect our business operations, including a loss of revenue and strained relationships with customers.

So Verizon was prepared, but not only short term. Trends show that the company has been implementing a long-term strategy away from unions and that it seems to be working. The previous two strikes against Verizon were in 2000 and 2011. Back in 2000, unions accounted for 69% of Verizon’s total workforce (see page 13). Now they only make up only 25%. Even more importantly though, in 2000, global wireless revenues, which come from non-unionized workers, only accounted for 14% of the total top line. Now the Verizon Wireless segment accounts for 70% of all revenues, taking in $91.7 billion in 2015. That’s critical because less than 1% of workers for the Verizon Wireless segment are unionized even now.

Meaning, not only is Verizon losing much less of its workforce now than it did in the 2000 strike. The workers that are striking have much less value and therefore bargaining power because most of the real revenue is coming from the non-unionized Verizon Wireless segment. For now then, it looks like Verizon management is in the driver’s seat, preparing themselves for this strike not only weeks in advance, but years from a long-term business perspective.

The 2000 strike against Verizon involved 80,000 workers for three weeks, totaling about 9.6 million work hours, assuming a 40-hour work week. Keep in mind that was while unions comprised 69% of the workforce and brought in 80% of the revenue. Now, they comprise 25% and bring in less than 30% of that total. With the prepared strikebreakers already hard at work on 12-hour shifts, it looks like Verizon can last much longer than three weeks this time, and perhaps even longer than the 17-week strike of NYNEX, which is now part of Verizon, of 1989.

How long can the unions last?

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