The Impact Of Economic And Political Factors On SPC Ardmona In Australia

Question:

Discuss about the Balancing Competing Interests of SPC Ardmona.

SPC Ardmona is an Australian based company traded as SPC, Shepparton Preserving Company.It is currently owned by parent company coca cola Amatil that specialises in large-scale fruit packaging. It is the largest current producer of premium packaged fruits and vegetables in Australia, accounted for processing 150,000 tons of fresh fruit and tomatoes from its proud supporter of Goulburn Valley community. However challenging economic conditions had led to the contraction in output of SPCA. It started in 1990 when Australian food industry had faced a decade of significant difficulties. Firstly due to consumer change in taste and preferences to freshly produced fruits and secondly due to increase in overseas competition (Hiscock, 2015).

Many other factors affected SPC such as its export market share in Canada who switched its import to the United States from America. High-interest rates and recession worsened the situation leading to the closure of most businesses in the sector resulting in a whopping loss of 2.6 million dollars by SPC. Such a huge loss discouraged the stakeholders leading to the election of a new board. The incoming board contracted KPMG Peat Marwick to review its affairs and make necessary recommendations which were to be acted upon by the management. As a result, some of the actions taken by the company included reducing permanent workforce, the closure of two off-shot loss-making business, termination of joint venture business and pay –less and re-staffing. The banks were still not contented with such initiatives and therefore demanded additional security in granting loans. This called for the implementation of further actions to cut the production cost. Some of the other plans taken of which both the management and the union disputed over include weekly pay cuts for employees, roistered day offs, high pay on weekends. This had altered the industrial awards and had created an issue among the unions and government.

Economic factors

The economic condition of Australia wasn’t good; it was going through a deep recession where people were losing about 600 jobs a day, and 80% of Victorians were registering for unemployment benefits (Ball, 2014). The other factor was the market demand shift towards fresh farm produce and the infiltration of cheap Chinese imports. China being an international leader agri-business, exports its canned foods which are relatively inexpensive in Australia whose food industry has not developed in food canning.

Challenging Economic Conditions

A group called “friends of SPC” was formed with the Former mayor, Jeremy Gaylord as its head with the mindset that closure of SPC could have an adverse effect on Shepparton.

It was the largest business in Shepparton contribution 40$ million into the local economy whereas employing around 300 permanent and 1000 seasonal workers in the peak time between January and April.

Political Factors

The political lobbying that led to the government’s rejection of the plea by SPC Ardmona for financial support of $25 million was a step that far much overshadowed the broader issue that affected the food industry of Australia.

The state opposition ( the coalition of the national and liberal party) indicated their support for SPC contrary to the government. Furthermore, there was support from various labor group. The trade union also was politicized in its quest for the justice of the employees although its effect was not much felt like that of the state (Bailey and Peetz, 2015). SPC commissioned a survey where 88% of the public supported the company and employee in negotiation deal to keep the company alive and secure the jobs.

Social Factors

Some of the recommendations by the KPMG affected both the permanent and casual employees of SPC. These included reducing permanent workforce, the closure of two off-shot loss-making business, termination of joint venture business and pay –less and re-staffing, weekly pay cuts for employees, roistered day off, and high pay on weekends. Some of these decisions contravened the some of the provisions of the Fair Work Commission of Australia thus sparking industrial strikes and petitions (Stewart, 2011).

The SPC management acted on the recommendations from the KPMG and the prospective banks that were to offer to fund. The recommendations majorly included the reduction of labor costs by disengaging 25 percent of the permanent employees through voluntary dismissal and normal attrition. Also, the offshoot businesses that made losses were shut down, termination of the contract with the canned food processing company, and the reduction of fruit prices from farmers . The new management recruited a new managing director who replaced all managers except the personnel manager thus coming up with a new management team. This move was preferable because the new management consented to the reduction of pay cut just like the new board directors whose remuneration was reduced by half. Still, the banks were not contented with the changes and thus recommended further decisions to be made to qualify the company for funds. The primary option that the corporation management took was to cut labor costs by 11.5 % across the board. After considering the reduction of labor costs as the best decision to saving the company, the management did not take the initiative of discussing the decisions with the unions that represent the-the SPC employees as it was the standard practice. Instead, the management directly engaged the employees on such deliberations a course whose motive is not clear. After reaching a consensus with its employees, the SPC leadership did not consult the Australian Industrial Relations Commission (AIRC), but to the contrary, they contracted the International Public Relations (IPR), which they were mandated with the role of publicizing the agreement to the media, two days after the consensus. The SPC only notified the Union ten days after the approval date and five days after it was trending in the press.

KPMG Recommendations and Actions Taken

The employees of SPC Ardmona were involved in the dispute because of the effect it had on their jobs. The company had taken measures to try and reduce production cost to continue surviving in the market. Some of the decisions included changes in provisions regarding cashing out of sick leave, redundancy payments, entitlements, and allowances, etc. regarding the sick leave. The SPC management’s decision to reduce labor costs was directly discussed with the employees instead of through the labor unions. The shop stewards in response devised a package that would as well minimize the production costs of the company but at the same time reduce the severe impact of weekly pay cuts of the staff . Whereas the proposed pay cuts were achieved, the agreement required the employees to relinquish the initial employment terms and conditions agreed in their awards. This meant that the workers could no longer be entitled to rostered days off, weekend rates, and shift penalties and stipends (Bray and Macneil, 2011). Fascinatingly, the package which was to last for twelve months minimized the terms and conditions of the awards without affecting the most of the over-award payments. The SPC management also agreed with the employees to initiate a profit-sharing scheme a year after the company regained its initial profitability. This agreement was overwhelmingly supported through secret ballot by the permanent workforce. However, the temporary workers were not consulted in the agreement neither were they invited to the meeting whose aim was to vote for the agreement, a direct contravention of their rights (Buddelmeyer, and Wooden, 2011). These seasonal workers were to be profoundly affected by the pay cuts more than the permanent employees. The fact that most of these seasonal workers lived in Shepparton were relatives to most of the permanent employees and members of the Food Preservers’ Union aggravated the matter.

One of the major stakeholders in the SPC Ardmona dispute was the government particularly in the manner employee relations were handled (Steel, 2013). The state and the federal governments both were in support of the industrial association processes that were inexistent as per the provisions of the industrial relations (Enterprise Bargaining in Australia, 2013). Their objective was preventing the dispute from being politicized and that it didn’t escalate to levels of complicating the industrial relations system that existed. They aimed to achieve this by keeping a low profile in their involvement and thus moderating it. However, the Labour government of Victoria refused to be involved in the dispute for reasons the government treated the issue as a matter in the private sector that needed to be solved only through the existing processes. According to Senator Cook, the objective of the Federal Government was to ensure that the SPC dispute did not become an obstacle to the industrial relations system. The Industrial Relations Minister tried to expedite the resolution of the issue but ended up stating that the AIRC parties were the ones who could solve the matter amicably. The minister did not stop at this but went ahead and met the SPC management in Canberra for consultation with Primary Industry minister and the advised the organization to find ways of awarding the variations. Furthermore, he suggested that over-award payments be cut for the permanent staff and to temporarily suspend the non-award work activities. In order to minimise the possibility of politicizing the dispute, the minister for Industrial Relations warned the opposition from meddling in the matter. Through the media and parliament, Senator Cook repeatedly reminded the opposition and other companies that any variation from the awards had to be ratified by the AIRC.

Impact of Economic Factors

The response of the union was quick to respond after realizing that the SPC had violated the award system. Immediately, the Victorian Trades Hall Council (VTHC) suggested the union representatives and the SPC management meet and resolved the stalemate. However, the meeting never matured, and the union single handed postponed the meeting by directions from the AIRC, a decision that is a hindrance towards the resolution of industrial disputes (Townsend, Wilkinson and Burgess, 2013). The disagreement was also on the SPC’s disregard of the number of representatives to attend the meeting. The community also was engaged in the negotiation of the rights of workers regarding terms and conditions of employment. Additionally, the politicians from the Liberal and National parties also joined the debates and fuelled it further. The hearing of the dispute was referred to the president of the IRC for consideration which found out that the parties involved in the case had not committed themselves fully to its resolution and therefore it needed not the full bench as requested by the SPC. Various factors were discussed between the unions and SPC with the aim of solving the stalemate. The findings indicated that first; the SPC management had committed procedural flaws in the variation of the award provisions under the supervision of experienced managers who in their capacity knew the outline procedures. Secondly, the hiring of the public relations company and the publication of the issues before informing the responsible unions was a gross violation. Therefore, based on the preceding conclusions, the union assumed that the board and senior management of SPC aimed at challenging the award system. However, the SPC Company excused their quick actions citing the pressures from the banks to resolve their financial quagmire, the Australia economic recession, increased competition from imports which the government had sanctioned (Hattersley, Isaacs, and Burch, 2013).

Irrespective of the challenges surrounding the dispute, the SPC management was able to increase the workers’ pay by 2.5 percent which was claimed as a gross overpay. The company was also able to secure funds from the Victorian government, in 2014 the Woolworths and SPCA were able to sign a contract for the supply of additional tonnes of local fruits for over five years. Furthermore, the merger of Shepparton Preserving Company (SPC) and Ardmona in 2002 enhanced its competition. In 2005, the Coca-Cola Amatil acquired the company to stabilize it further.

I think The SPC settlement of disputes was not beneficial to most of the stakeholders. First, because the decision to merge it with Ardmona reduced their shares and was not their original intention. Furthermore, the decision to buy out the organization to Coca-Cola relinquished any ownership that existed before.  But for the case of the employees, the decision was beneficial because they could regain their pay cuts and continue to work in a thriving company even though acquired by different owners who also guaranteed job satisfaction. To the government as part of the stakeholders, the decision was beneficial because the company could still generate tax for the state as before.

The SPC dispute shows that conflicts about industrial relations if not handled properly can impact other organizational ties. This conflict suggests that employee relations are complex and interconnected with various parties of interest such as the unions, government, employees and the management.

References

Bailey, J. and Peetz, D., 2015. Australian unions and collective bargaining in 2014. Journal of Industrial Relations, 57(3), pp.401-421.

Ball, L.M., 2014. Long-term damage from the Great Recession in OECD countries (No. w20185). National Bureau of Economic Research.

Bray, M. and Macneil, J., 2011. Individualism, collectivism, and the case of awards in Australia. Journal of Industrial Relations, 53(2), pp.149-167.

Buddelmeyer, H. and Wooden, M., 2011. Transitions out of casual employment: the Australian experience. Industrial Relations: A Journal of Economy and Society, 50(1), pp.109-130.

Department of Industrial Relations 2013, Enterprise Bargaining in Australia, Commonwealth of Australia, Canberra.

Farrar, J., Hiscock, M. and Lo, V.I. eds., 2015. Australia's Trade, Investment and Security in the Asian Century. World Scientific.

Hattersley, L., Isaacs, B. and Burch, D., 2013. Supermarket power, own-labels, and

manufacturer counterstrategies: international relations of cooperation and competition in the fruit canning industry. Agriculture and human values, 30(2), pp.225-233.

Hiscock, M., 2015. Shepparton Preserving Company: The Tomato Processing Industry and the National Interest. World Scientific Book Chapters, pp.83-94.

Steel, K.M., 2013. Point of View: A Significant Regional Industrial Dispute from a Novel Perspective. Provenance, (12).

Stewart, A., 2011. Fair Work Australia: The Commission Reborn? 1. Journal of Industrial Relations, 53(5), pp.563-577.

Townsend, K., Wilkinson, A. and Burgess, J., 2013. Is enterprise bargaining still a better way of working?. Journal of Industrial Relations, 55(1), pp.100-117