BRITISH UNIONS GO JAPANESE Onetime militants are tripping over each other to sign labor contracts with Japanese companies, surrendering all those restrictive job rules that paralyzed British industry for so long. The reason: the Japanese are creating jobs in work-starved Britain.
By Michael Brody RESEARCH ASSOCIATE Philip Mattera

(FORTUNE Magazine) – BRITAIN'S CLASS WAR may not be over, but the Japanese are winning some battles. From the played-out mining valleys of South Wales to the rusting shipyards of Tyneside, onetime militants are scrambling to sign on as docile house unions for new Japanese factories. All-powerful shop stewards and weak- kneed British managers -- who engaged in years of suicidal industrial warfare -- are being left behind on the rubbish heap of history. So far Japanese companies have signed about a dozen contracts that wipe out restrictive work rules and eliminate disputes over which workers do what jobs. Some contracts even bar strikes. Though such deals represent a fraction of the traditional adversarial contracts that still hobble much of British industry, they've become a hot topic wherever workers or managers gather to down a pint or two. And they aren't just being signed with Japanese companies. Two U.S. packaging outfits, American Can and Continental Can, have installed them, and Eddy Shah, a regional newspaper publisher who became a national hero two years ago by winning a violent printers' strike, is about to make such a deal for his new national newspaper. Similar contracts are showing up in older plants too, such as Shell's chemical works near Manchester and Borg-Warner's gearbox plant in South Wales. Faced with threats that the plants might close, unions agreed, among other things, to throw out any rules that hurt productivity. While no-strike deals that resort instead to binding arbitration have yet to be put to the test, a handful of union leaders are preaching the once heretical doctrine that strikes are as disastrous for workers as for management. The preachers are winning converts among workers. That's good news for companies, Japanese or not, setting up new plants in Britain -- and bad news for competitors still stuck with plants where bitter labor-management relations are built into the woodwork. The Japanese hardly tamed Britain's ferocious unions all by themselves. Chronic high unemployment and tough new laws from the Thatcher government helped a lot. Days lost to strikes in private industry are near an all-time low. The fact that most Japanese plants in Britain are new or have been built in the past few years, however, has greatly magnified the importance of making deals with the Japanese. Union leaders are desperate for new members: since 1979 membership is down by about two million. For the Japanese, Britain offers a low-cost manufacturing base inside the trade walls the European Community has erected against them. Wages average less than $250 per week -- compared with about $350 in West Germany -- and can be as low as $150 for young women assembling TV sets in Wales. Inflation is around 6% this year and is expected to be below 4% in 1986. The economy has been growing at a healthy inflation-adjusted 3% to 4% a year for the past three years. The biggest chunk of Japan's $1.4billion investment in Common Market manufacturing operations is in Britain. If the Japanese succeed with British workers, their British bridgeheads will become a threat to older, less efficient industries both in Britain and on the Continent. If possible, the Japanese prefer no unions at all in their new British plants. In the new high-tech plants recently built by Japanese companies -- mostly along the M4 motorway between London and Bristol and up in Scotland between Glasgow and Edinburgh -- only about a quarter of electronics workers are organized. When the Japanese can't keep unions out, they insist on single- union deals. They want no part of the internecine warfare among a dozen or more rival unions that has ravaged so many British factories. They also like to put all workers into one job classification, not only to get more efficient use of the work force, but also to prevent who-does-what disputes within the single union. To settle grievances, the Japanese put their own spin on an old British labor tradition, the works council, a group of elected workers within plants. In the past councils handled minor matters while shop stewards settled major grievances. The Japanese added a few managers to the councils and gave them power over all grievances. The idea is to work out disputes through discussion, not confrontation. Some councils even make wage recommendations. A NUMBER OF UNIONS are making Japanese-style arrangements, but two in particular are leading the charge: the 400,000-member Electrical, Electronic Telecommunications, and Plumbing Union, known as the Electricians, and the one-million-member Amalgamated Union of Engineering Workers, known as the Engineers. Both are getting heat from leftist unions within the Trades Union Congress, or TUC, the umbrella organization for British unions. The TUC has not condemned either for Japanese-style contracts; many other large unions are trying to set up similar deals for themselves. But the TUC has attacked the Engineers and the Electricians on what is essentially a side issue -- the acceptance by both unions of funds from the Thatcher government to finance secret ballots of their memberships. Secret ballots, like Thatcher herself, are anathema to old-line union bosses, who prefer to take strike votes by a show of hands at mass meetings dominated by activists. The Electricians have long antagonized their more left-leaning colleagues in the British labor movement because of their willingness to seek accommodation with progressive managements. After throwing out a Communist leadership as the result of a ballot-rigging scandal in the 1960s, the union's new moderate leaders negotiated a pioneering binding arbitration agreement with electrical contractors in the construction industry. While not preventing sporadic wildcat strikes, the deal has kept the number of days lost from strikes far below the average for British industry. By contrast the Engineers, who represent machinists and other skilled tradesmen in various manufacturing industries, were heavy contributors to paralyzing British industry well into the 1970s. One of Britain's most ancient craft unions, with fading banners and hallowed traditions dating back to the 19th century, it was deeply involved in bitter work rule disputes. A dozen years ago the union's leadership ran the gamut of all the feuding tribes of British Marxism, from Trotskyites and Moscow-liners to Maoists. But the long, brutal shakeout in Britain's basic industries has left the union politically more conservative and industrially more progressive. The Engineers played a constructive role in the long and ultimately successful struggle to keep alive British Leyland, the nationalized automaker now called BL. The Electricians did not start out as allies of the Japanese. When Hitachi and Toshiba sought to build plants in Britain in the late 1970s, the union joined domestic manufacturers in persuading the Labor government to force them into joint ventures. Toshiba teamed up with the Rank Organisation in 1978, and Hitachi was dragged to the altar with GEC in 1979. Eric Hammond, head of the Electricians, recalls that a Hitachi executive had earlier come to the union's headquarters in a London suburb to plead against the joint venture requirement. They could cope with British workers, said the Japanese, but they didn't want to work with British managers. Both joint ventures suffered heavy losses and the Toshiba-Rank plant eventually closed. In the end the government and the union begged Toshiba and Hitachi to take over the plants as wholly owned operations. The results have been dramatic. Toshiba signed a single-union contract with the Electricians (which replaced four other unions) and reopened the plant in 1981 with 300 workers, down from 3,000. The plant is now profitable. Hitachi had a more complicated problem because the plant was still running -- complete with five unions in addition to the Engineers -- when GEC bowed out in 1984. The company put together a deal with the Electricians eliminating demarcation lines between trades that had blocked flexible use of labor. Members of the other unions could remain in them -- and keep paying dues -- but the Electricians had sole negotiating rights for everybody. Hitachi brought in new high-tech assembly equipment and slashed the work force to 800 from 1,300. IN ALL, the Electricians have signed 16 contracts, including a few with American firms, incorporating elements of the Japanese style of contracts. Six or eight of these go the whole route -- a single union, labor flexibility, and binding arbitration. Some agreements have taken the union as far afield as the aluminum and paper industries. The Electricians union is near agreement with Eddy Shah, who intends to use them to break the stranglehold the old printing crafts unions have kept on the introduction of electronic technology in Fleet Street. The Electricians' Japanese deals go further than those of any other union in eliminating, at least on paper, recourse to strikes. If the two sides can't agree on a wage package, the issue goes to so-called pendulum arbitration. An outside arbitrator must choose the final offer of one or the other -- he is not allowed to split the difference. That encourages both sides to see who can stake out the most sweetly reasonable position. An outside advisory and conciliation service can also be brought in to help reach agreement without resorting to pendulum arbitration. So far no one has needed arbitration. The intermediate procedures helped Sanyo reach a peaceful agreement for a 7% wage hike at its Lowestoft television plant early this year. In April, Hitachi and the Electricians accepted the works council's recommendation for a 5% pay increase without even bothering with negotiations. The agreement was reached, as the Financial Times reported, ''without a whisper of threatened industrial action'' -- in sharp contrast to the constant strikes and disruption during the joint venture years under GEC management. The Engineers' potentially most important contract is with Nissan for its auto factory nearing completion near Newcastle in the north of England. Initially the plant will have just 470 jobs, but the number could rise to 2,700 by 1987. Two other major unions, the Transport and General Workers and the General and Municipal Workers, were prepared to make deals similar to what the Engineers eventually signed. The Engineers got the company's nod partly because the union is stronger than the other two in that part of England. NISSAN'S NEW FACTORY was denounced as a threat to British jobs both by Robert Lutz, chairman of Ford of Europe, and by Ken Gill, Communist head of the Technical, Administrative, and Supervisory Staffs union. They argued that increased Japanese competition might hurt Britain's existing automakers so much that the result would be a net loss of jobs. That's not the view in the Newcastle region, where coal, steel, and shipbuilding are all dead or dying. Nissan's ads for 250 assembly workers at wages of around $10,000 a year drew 11,000 applications. The single-union agreement with Nissan, accepting the full package of labor flexibility and Japanese work practices, was reached without much difficulty. Says Joseph Cellini, the union's regional organizer: ''We were starting from scratch. It's much easier to negotiate a system like that with a new plant than it is to try to alter practices at existing plants.'' The one term the union could not accept was compulsory arbitration; if negotiation and conciliation fail to produce agreement, union leaders can ask the work force to vote on whether to go to pendulum arbitration or whether to strike. Nissan doesn't see that as a problem. Peter Wickens, Nissan's personnel director, believes that by starting with a clean slate Nissan should avoid the infighting that has racked British auto plants. The effect of these agreements on other firms setting up plants in Britain should be dramatic. Many Japanese companies planning to start British plants have been dropping by Hitachi to see how it's getting along with a unionized British work force -- as Nissan did while it was considering its options. The Electricians are making a bid to become the union of choice for companies planning new plants, invited in before other unions invite themselves in. The union has put together a glossy brochure touting its modern attitudes about high technology and flexible work practices. The brochure contains words of praise from satisfied British employers -- and it's been translated into ( Japanese. The union's attitude owes less to the spirit of the ''Internationale'' than it does to a new wave of international thinking by the British proletariat.