UNION TARGETS SAFEWAY CEO 2003-11-10 (1)

ELLIOT ZWIEBACH

LOS ANGELES -- This time it's personal.

As the United Food and Commercial Workers Union pursues new contracts in Southern California and elsewhere, it is calling attention to its dissatisfaction with Steve Burd, chairman and chief executive officer of Safeway -- singling him out as the roadblock in settling the labor dispute and accusing him of mismanagement.

"He's the one who has personalized this situation because he's leading the industry down a very dangerous road," Ellen Anreder, a spokeswoman for seven UFCW locals in Southern California, told SN last week.

"There hasn't been a strike in Southern California in 25 years, and negotiations have been quite amicable during that time, but Steve Burd has made it personal this time, and we believe he is singly to blame for causing this strike. We've never singled out anyone before, but we've never encountered such a person before either.

"He's been very vocal in terms of telegraphing that a strike was coming, and that he would force a strike in an effort to bust the contract because he no longer wants supermarket operators to pay health care costs. This strike is just one step in a long series of tactics, and Albertsons and Kroger have hitched themselves to his wagon."

Rick Icaza, president of UFCW Local 770 here, said in public remarks that Burd's mismanagement of Dominick's is part of the reason for his crusade to reduce the company's spending on health care and pension benefits. "Now he wants to pass that mistake on by taking away benefits from members," he said.

In a conference call with Safeway's institutional investors, Sarah Palmer-Amos, a member of the international union's executive committee, said Burd is "the strategist and architect" of the concept that places the blame for Safeway's slumping performance on its union costs.

However, she pointed out sales have been falling for several years at each of Safeway's acquired companies -- Randalls, Genuardi's and Dominick's -- "so we would encourage Safeway to develop a strategy to develop sales rather than fighting with employers, customers and shareholders, or else a change [at the top] needs to be made."

A Safeway spokesman told SN the union's decision to personalize its fight with the employers "is a typical union tactic when it falls short on facts. That's when it resorts to personal attacks.

"Steve Burd chose to take a leadership position, in concert with the leaders of Albertsons and Kroger, to encourage the industry to confront these difficult issues," the spokesman said.

The union made its attitude toward Burd blatantly clear in a full-page ad in the Oct. 31 Wall Street Journal, under the headline: "Which Is the Most Effective Way to Improve Safeway's Bottom Line? A. Stop CEO Steve Burd's Mismanagement? B. Cut Health Care Benefits for Workers?"

The ad said Burd has told the financial community "that forcing labor disputes to eliminate health care benefits for working families in Southern California would help Safeway's bottom line by $130 million.

"He miscalculated again. Burd has antagonized thousands of workers, and alienated millions of customers in one of the richest markets in the country. Hundreds of millions of dollars will be lost as those customers never come back again to a Safeway supermarket.

"Isn't it time to fix the real problem? Stop Steve Burd before he loses even more money for the company."

The UFCW has run ads directed at consumers in major newspapers in Los Angeles, San Diego and Santa Barbara, where the strike is occurring, and it has also run ads in newspapers in several other markets in which Safeway operates.

Financial analysts told SN they believe Burd's hard-line stance may be hurting his chances of achieving the labor parity he is seeking.

Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., said Burd "has certainly become a lightning rod for the union's anger. Burd has stuck to his guns to get a level playing field."

Gary Giblen, senior vice president and director of research at C L King Associates, New York, said Burd has been "a galvanizing force in the industry as he's stepped forward to address the issue of labor disparity. But rather than walking softly and carrying a big stick, he's using that stick to pound the earth, and that doesn't work.

"It's possible he could have exercised some degree of leadership without being quite as antagonistic or as dismissive as he's been toward the union because he isn't leaving the union any room to save face when a settlement is negotiated."

Jonathan Ziegler, principal in PUPS Investment Management, Santa Barbara, Calif., said he doubts Burd's position could be imperiled by the current labor situation. "It seems apparent Steve has the confidence of the board, or it would have given some previous indication of dissatisfaction," Ziegler said. "On the other hand, Burd seems to have run out of ideas."

Burd made his views clear when he told financial analysts the chain was willing to tolerate a strike, regardless of the short-term impact, "because if we did a business-as-usual contract, our costs over three years would rise $130 million or more, so we view this as an investment in our future. Absorbing the impact of a strike is infinitesimal compared with the cost of not doing this."