MADISON HEIGHTS, Mich. -- In what both labor and management called a "sacrifice," unionized workers of Farmer Jack stores here voted to approve contract modifications that would save 6,000 jobs and 60 stores that would otherwise be sold or closed.
The approval signaled a new commitment to Farmer Jack by owner A&P, Montvale, N.J., which announced intentions to sell the chain in May and only months ago had told union officials it intended to leave Michigan "one way or another."
However, a potential deal to sell the chain -- which required similar concessions by the union -- fell apart last month, leading to "crisis negotiations" between the parties, the union said. At these meetings, A&P said its options were to close stores, sell them to non-union operators or to continue to run the chain if workers make contract concessions, according to the UFCW.
"None of the options presented by the company were acceptable, but given the dire circumstances we did agree to their request with the understanding our intent was to negotiate improvements to the prior modified agreement," Victoria R. Collins, president of Local 876, said in a statement.
The new agreement calls for a 10% wage cut beginning in January, but for wages to rise by 12% over five years. Workers would also receive a share of any profits over $1 million beginning in March 2006. The union also received assurances from A&P that 60 stores would remain open at least until March 2007; and that the contract would be transferred to a new owner in the event Farmer Jack is sold.
A&P closed 15 Farmer Jack and Food Basics stores over the summer in moves it said would make the chain more palatable to potential buyers. It currently operates 71 stores, meaning 11 more may still close.
"In light of this support by our union associates, A&P is committed to the ongoing operation of Farmer Jack as stated in the new agreement," Richard De Santa, a spokesman for A&P, said in a statement.
"Our goal is to revitalize the business, so that they can continue working with us and share in our future success."
Mike Carter, president of Farmer Jack, resigned last month when the potential sale, believed to be to Spartan Stores, Grand Rapids, Mich., soured. It was unclear late last week who would succeed him.
A&P acknowledged that a tough economy in greater Detroit -- "along with some business decisions the company made that did not succeed" -- led to difficulties at Farmer Jack. Stores in the division experienced same-store sales declines of 3.4% during its most recent quarter. During the 2004 fiscal year, Farmer Jack same-store sales fell 5.3% and sustained $20 million in operating losses.
Burt P. Flickinger III, managing director, Strategic Resource Group, New York, told SN that it was a mistake for Farmer Jack to close all of the stores in the division for 37 hours while renovating them in June 2003. "That gave Kroger and Meijer tremendous opportunity to capitalize with consumers who couldn't go to Farmer Jack stores," he said.
Job losses and struggles within the U.S. auto industry are devastating Detroit's economy, sources added. Flickinger noted that defunct grocery chain Borman's -- which was acquired by A&P in 1989 and folded into Farmer Jack -- suffered similar financial trouble the last time fuel inflation and struggles in the auto industry coincided.