Gate Gourmet: fighting dog-eat-dog capitalism

By Chris Hickey

On 10 August the international catering firm Gate Gourmet sacked some 670, mainly Asian women, workers at Heathrow for “illegal strike action”.

Gate Gourmet had brought in 120 “seasonal workers” despite planning a restructuring “…that was likely to see hundreds of full-time staff fired” (Financial Times briefing, 23 August). Laying off permanent staff whilst hiring temporary staff was obviously a move to casualisation and seasonal working.

Provoked by Gate Gourmet’s move, the staff went to the canteen in readiness for a union meeting whilst their Transport and General Workers Union (TGWU) representatives went to see the management. “Management subsequently told staff that they had three minutes to get back to work or they would be sacked. They refused and remained in the building. Members starting the late shift also refused to come into work having heard the news. Those assembled in the car park were sacked by megaphone” (TGWU website). Dismissal letters were then sent to all staff who were on leave, including sick leave.

The sackings came in the wake of months of Gate Gourmet pressure on the workers and their union. In June the company put forward a cuts package that was recommended to the workforce by the TGWU but heavily rejected by the membership. Under the proposals hundreds of jobs would have been lost, and pay, sick pay and pensions would have been hit.

The TGWU website does not outline the terms of the package but does say, “The T&G said that any restructuring proposals needed to be across the board and include management grades. The company then re-graded 147 shop-floor workers as managers only to make them redundant. The original management team put themselves on higher starting salaries than before and made it clear they would not be part of the restructuring.”

The hiring of agency staff, apparently predominantly East European and Somalian, at lower rates of pay quickly followed the mass sackings.

Gate Gourmet’s plan to reduce its British labour costs, by worsening terms for existing (now sacked) workers and to a considerable extent replacing them with cheaper labour, is part of its world wide effort to push down labour costs and return to profitability.

Employing some 22,000 staff worldwide, and providing food to more than 300 million passengers annually in 29 countries on five continents, Gate Gourmet has not returned a profit since 2000. Its owners, private equity company Texas Pacific, clearly intend to shift the costs of that situation onto the backs of its international workforce by cutting “labour costs”.

This means the jobs and living standards of real workers who have rents and mortgages to meet, children to raise, elderly dependants to look after, and bills to meet.

On 15 August the Daily Mirror revealed a year-old secret Gate Gourmet plan, entitled Milestones to provoke an illegal strike, sack its existing workforce, and replace them with cheaper agency staff.

The Mirror reported, “referring to the firm's drivers, the dossier details how staff could be told their working conditions were going to be dramatically worsened, so provoking fury.

Among the threats listed were: “No redundancy packages, no leaving early, no extra pay for extra work, random drug testing, no smoking, eating or drinking in cabs.” The plan also advises how to sack staff…Under the heading “Can we replace employees?’ the document lists details of agencies that could recruit staff from Eastern Europe. It said all staff would be employed into an external company and contracted to Gate Gourmet London.” The Mirror reported the plan advising, “Consistently state our case as being reasonable and willing to reconcile.” “Hard line resolve to staff already dismissed."

Gate Gourmet claimed the document obtained by the Daily Mirror was “…drafted as a proposal by managers who are no longer at the company” and that “current management ignored the plan... considering [it] highly inappropriate and undesirable”.

Why these claimed former managers drew up the plan in the first place has not been explained by Gate Gourmet. One reasonable assumption is that it was drawn up on senior instructions. In any case, the actual events look remarkably like the plot revealed by the Daily Mirror.

Just eight months ago a new company, Versa Logistics, was established as a wholly owned subsidiary of Gate Gourmet with its UK millionaire boss Eric Born as sole shareholder. Born’s spokesman Mark Lunn has explained, “It was important we had a contingency plan if something went wrong, and sensible to have a company in place [Versa] that can bring in staff when necessary.”

The Guardian quoted a Gateway Gourmet spokesperson as saying Versa “…can bring in temporary drivers quickly from places like Poland” (13 August).

Gate Gourmet has emphasised how reasonable it is has been, its desire to reach agreement, while maintained “a hard line resolve to staff already dismissed.” Its public position is that there will be no reinstatement of those who “instigated and incited the walkout”.

In the meantime Gate Gourmet has also been using Blue Arrow Agency to replace sacked staff and on a rate of just £6.00 per hour. As agency staff these people do not, of course, have access to the employment terms that the sacked staff once had and they do not enjoy the same legal rights.

Despite all this, anybody joining the sacked Gate Gourmet workers and their families demonstrating on Beacon Hill at Heathrow Airport cannot but be impressed by their unity, solidarity, and upbeat mood.

These are people who are faced with the worry of how the hell they are going to make ends meet. For some families the mass sackings have cut off income for both husband and wife. Yet the mood among the women and men and their kids is exceptional. Each day food and drink is delivered from the local Sikh temple to the sacked workforce. The motorhorn salutes of support from postal vans, Skychef drivers and others makes the sense of belonging and sticking together seem greater still.

These people, mainly Asian women, have shown the rest of the labour movement the guts that we need if we are to move on from a labour movement hamstrung by anti-union laws and bedevilled by deregulation, contracting out, low pay, and collapsing pension schemes.

In a dog eat dog world, a visit to Beacon Hill is a reminder that the world doesn’t have to be the way it is. Life doesn’t have to be summed up by the money grabbers, on the make politicians and well-heeled self-satisfied commentators.

Similarly, the solidarity action taken by the baggage handlers and other Heathrow workers was a demonstration of selflessness. These workers lost wages in support of their fellow workers and as we have seen was pivotal in bringing Gate Gourmet bosses back to the negotiating table.

The solidarity action, which rocked BA back on its heels (costing BA some £40 million), called for courage and sacrifice. The walkouts were doubly illegal: they were not the subject of a ballot and they were “secondary.”

With a union movement under the cosh of the anti-union laws, and with workers’ at risk of the sack, such solidarity action is pretty much without precedent in recent years. But the Heathrow workers have shown that where the action is strong, hard hitting, and powerful in its effect, then the employer balks at taking action against them.

Without the solidarity of the baggage handlers the world’s media would not have descended on Heathrow airport or reported in any detail the mass sackings at Gate Gourmet — their action was not irresponsible but necessary. Indeed, as we go to press, the best hope for the most favourable outcome at Gate Gourmet is if there is further action by other Heathrow workers and the TGWU leadership ought to consider how they can make this happen.

American Union UNITE HERE, along with the International Brotherhood of Teamsters, represents over 6,000 members working for Gate Gourmet in the States. Its President, Bruce Raynor, has said, “We are outraged by such immoral behavior [the mass sackings in Britain] and want to make sure Gate Gourmet knows we will not tolerate such actions in the US, the UK, or anywhere else in the world.” In a letter to Gate Gourmet Chairman and Chief Executive David Siegel, he wrote, “failure to resolve the matter in the UK will certainly cause the unrest to spread across the Atlantic as our members will be forced to take every lawful measure possible to support our fellow union members.”
Quite what this promise would mean if implemented is not clear. But there is an obvious case for international trade union unity and action against Gate Gourmet.

UNITE HERE are well aware that Gate Gourmet’s desire to push down labour costs, and their strong arm tactics, are not somehow reserved for workers in Britain. Its website states: “UNITE HERE and the Teamsters recently compelled Gate Gourmet to reinstate health coverage that it had unilaterally revoked, seemingly in retaliation for the US employees’ overwhelming rejection of the company’s contract offer. Gate Gourmet has been accused of provoking the Heathrow crisis [in order to sack workers]. Some believe Gate Gourmet was trying to provoke a similar reaction by its US employees when it unilaterally revoked the health coverage..”

“There is no middle ground. The company has insisted upon major concessions that hurt every economic part of the contract substantially… the company is simply not being reasonable” and have pointed out that the reductions sought by Gate Gourmet are not sustainable for workers on $11 (£6.20) an hour average wages (Guardian, 13 August).
The matters in dispute in the US have since been referred to binding interest arbitration.
Gate Gourmet say “Because labor represents about half of the company’s expenditures and is the single largest expense item, we are in the regrettable position of having to ask our employees also to make sacrifices….” But the talk of employees also making sacrifices is nauseating. The sacked Gate Gourmet kitchen staff were picking up £12,000 a year and the drivers less than £16,000. In the States the average pay of the Gate Gourmet staff is $11 (£6.20) an hour.

Compare that to David Bonderman, the many times over billionaire founder of the American private equity firm Texas Pacific. Bonderman’s 60th birthday bash, on 16 November 2002, cost some $10 million and involved him and his 500 guests being privately entertained by the US comedian Robin Williams and the Rolling Stones.

Throughout the dispute BA has tried to argue that it has been caught in a fight between other parties – that it is just an innocent party to the whole affair. The claim is simply disingenuous.
Gate Gourmet was BA’s in-house catering unit until 1987 when it sold the company for a tidy sum to Swissair. Since then BA has squeezed the contract as hard as it can as it has sought to cut costs in the face of cheap flight rivals (Bonderman of Texas Pacific is a director of Ryanair), higher fuel costs, and a drop in customer demand following 9/11.

According to the General Secretary of the TGWU Tony Woodley, BA “…has sought an enormous £50 million plus reduction in catering costs over the duration of the contract, with year-on-year productivity improvements of three per cent…[with] no allowance for even the most modest inflation-linked increase in wage costs over the years since 1997. And this from a company presently making record profits” ( Guardian, 16 August).

Squeezing of the contract is the driving force for much if not all contracting out. It is far easier to get another company (the outsource company) to come down on labour costs in labour intensive industries than it is for the original parent company to do it itself. And the outsource company is always able to blame the original parent company for having to cut wages, jobs and conditions and to threaten its new staff with the loss of the business if they do not accept the cuts.

None of this is to say Gate Gourmet is an innocent party. Its owner, Texas Pacific specialises in buying up vulnerable companies, “turning them around” and profiting from them and selling them on. Texas Pacific bought Gate Gourmet in 2002 for $870 million (www.businessweek.com) once Swissair collapsed into financial problems.

Nevertheless, the fact that BA is offering to extend the contract held by Gate Gourmet, and has, according to some reports, put up the money for Gate Gourmet’s offer of redundancy to some sacked workers, shows that it cannot readily replace the company and that the outsourcing was fundamentally about cost cutting at the expense of its former employees.

As we go to press, reports of a Gate Gourmet offer of an enhanced redundancy package remain unclear. Gate Gourmet seems to be suggesting that those who turn it down may return (on reduced terms and conditions) provided they are not amongst the “militants” whilst the TGWU is suggesting that anybody who wishes to return to work will do so.
Whatever the precise truth, if Gate Gourmet succeed in keeping out a large number of the sacked workers, including the most active reps, and in reducing the terms of those who go, then they will have gone someway towards the package they wanted earlier in the year.

This dispute, more than most, shows up what New Labour stands for and why the unions have to start to redefine labour movement politics against the Blair government.

Workers in Britain need the replacement of the anti-union laws with positive legal rights, most fundamentally the right to strike when they need to and the right to take solidarity action. Less obvious is that New Labour’s years of blocking the EU Agency Workers’ Directive has been a gift to employers like Gate Gourmet. (The directive was designed to give agency workers the right to equal treatment with a comparable permanent employee with regard to job security, pay, and other rights).

New Labour loves the deregulated, contracted out, “flexible” economy. Its time for the unions to argue for a different vision of society and to carve out a labour movement alternative to Blair/Brown.