VZCZCXRO7118
PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #5406/01 2841605
ZNR UUUUU ZZH
P 111605Z OCT 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 9175
RUEHKO/AMEMBASSY TOKYO 0473
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 03 MEXICO 005406 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILSCR, WHA/MEX FOR DDARRACH, USDOL FOR 
ILAB 
 
E.O. 12958: N/A 
TAGS: ECON ELAB ETRD PGOV PINR MX
SUBJECT: AUTO INDUSTRY LABOR DISPUTE RESOLVED DESPITE, NOT 
BECAUSE, OF COMPANY,S CODE OF CONDUCT 
 
¶1.  SUMMARY: A month,s long auto industry labor dispute was 
recently settled when the company, Fujikura Automotive 
Mexico, reached an agreement with disgruntled workers in the 
northern Mexican state of Coahuila.  The dispute began this 
past June when Fujikura announced plans to layoff its entire 
workforce, void a collective bargaining agreement, and rehire 
the same workers at lower wages.  When the workers objected 
to being paid less for the same job both the local 
authorities and some of their own union leadership attempted 
to convince them that taking a lower salary was better than 
no salary at all.  The disgruntled workers were supported in 
their dispute by a labor organization called the Border 
Workers Committee (CFO).  The CFO has close ties to the 
AFL-CIO and because of this it was accused of being an 
outside agitator working for organized labor interests in the 
U.S.  Ultimately the workers settled for less than they had 
hoped but more than Fujikura wanted to pay.  For the most 
part their claims closely followed Mexican Federal Labor and 
local customs which made it difficult for Fujikura to accuse 
them of making unreasonable demands.  In the end a settlement 
was reached because the workers received the support of CFO, 
some of their lower level union leaders and the help of an 
outside negotiator.  Appeals by the workers and their 
negotiator to the company,s Code of Conduct, the tool often 
pointed highlighted as a mechanism for softening the harsher 
aspects of global competition, appear to have played no real 
role in resolving this dispute.   END SUMMARY 
 
 
THE COMPANY WANTS A NEW DEAL 
---------------------------- 
¶2.  In June of 2007 a protracted labor dispute erupted in the 
city of Piedras Negras in the northern Mexican state of 
Coahuila when the company, Fujikura Automotive Mexico, 
unilaterally attempted to cut its labor.  Fujikura Automotive 
Mexico is part of a Japanese owned corporation with 
operations in Asia, Mexico and the US.  In the US the 
corporation, Fujikura Ltd, owns two subsidiaries: Fujikura 
America Inc. and America Fujikura Ltd. In its plant in 
Piedras Negras, Fujikura produces automotive wire harnesses 
for Suburu,s Tribeca; Toyota,s Tundra, Camry and Corolla; 
and Chrysler,s Jeep Wrangler. 
¶3.  The Piedras Negras plant was owned by Alcoa until late 
¶2005.  Prior to that time, Fujikura and Alcoa operated a 
joint venture in Piedres Negras called Alcoa Fujikura Ltd for 
many years.  When ownership of the plant passed solely to 
Fujikura in 2005 the company pledged to honor the workforce's 
existing contract. Unfortunately for the workers, shortly 
after taking over the plant Fujikura decided that its pledge 
was too expensive.  Discussions with the plant,s workers 
aimed at releasing Fujikura from its pledge dragged on but 
with unsatisfactory results from the company,s perspective. 
Consequently, Fujikura announced plans to layoff its entire 
workforce of 725 employees, void the existing collective 
bargaining agreement, and rehire the same workers under a new 
less expensive contract. 
THE WORKERS RELUCTANTLY AGREE BUT ( 
----------------------------------- 
¶4.  Not surprisingly the workers resisted the idea of 
abandoning the existing collective bargaining agreement, 
especially when that meant working at the same jobs but with 
reduced wages.  When confronted with this situation the 
workers, who belong to the Confederation of Mexican Workers 
(CTM), turned to their local union leadership for guidance. 
The position of the senior union leadership in Piedras Negras 
was that a job with lower wages was better than being jobless 
and with no wages at all.  Over time the local union 
leadership persuaded the workers to take the deal.  The 
workers reluctantly agreed to accept a new contract with 
lower wages but they had a condition. 
¶5.  From the workers, perspective they were being fired from 
their jobs and as such they felt they should be formally 
&liquidated8 and given the full benefits of a liquidated 
employee under Mexican Federal Labor Law.  Mexico Law 
requires employers to pay a substantial severance packaged 
called &liquidation8 whenever an employee is let go from 
their job. (Note: Liquidation consists of three month wages 
plus a complicated formula based on an employee,s years of 
service.  Employers are legally required to pay liquidation 
 
MEXICO 00005406  002 OF 003 
 
 
whenever an employee is dismissed regardless of whether the 
worker has already arranged subsequent employment.) 
¶6.  In addition to the liquidation benefits the workers also 
insisted on receiving an additional 20 days of salary for 
every year of seniority.  The 20 days payment is not/not 
legally required under Mexican law but such payments had been 
routinely made by Alcoa whenever an employee was laid off due 
to workforce reductions.  Fujikura refused to pay the 
additional 20 days salary and a protracted labor dispute 
began. 
WORKERS DISAPPOINTED WITH UNION LEADERSHIP SEEK OUTSIDE HELP 
--------------------------------------------- -------------- 
¶7.  To the surprise and disappointment of the workers, their 
senior union leadership at both the state and local level, as 
well and the Piedras Negras city government, sided with 
Fujikura against them.  Various attempts, accompanied by 
petty harassment from the union leadership and the city 
government, were made to compel the workers to accept 
Fujikura,s offer of a new lower wage contract but without 
liquidation and without the 20 days pay.  At one point 
Fujikura threatened to simply fire the workers without even 
paying the liquidation benefits if they did not accept the 
company,s original offer.  (Note: Fujikura,s threat was an 
empty gesture.  Mexican federal labor authorities would 
certainly have compelled the company to pay the legally 
mandated liquidation benefits and there is no doubt that the 
workers were aware of this.) 
¶8.  Abandoned, from their perspective, by their senior union 
leadership the workers sought and found outside help.  The 
help came from two sources, an organization called the Border 
Workers Committee (Comite Fronterizo Obrero -- CFO) and a 
local labor lawyer closely tied to Mexico,s main opposition 
political party, the Party of the Democratic Revolution 
(PRD).  The help the workers obtained from the CFO and the 
labor lawyer added a new and complicating dimension to the 
dispute. 
¶9.  The CFO is an organization which describes itself as 
being dedicated to educating Maquiladora (foreign owned 
assembly plants) workers about their rights and supporting 
worker efforts to build more democratic unions.  The CFO says 
it works all along the US/Mexico border but it appears that 
its efforts are mainly focused in the state of Coahuila.  For 
at least the past six years the CFO has received considerable 
support from the AFL-CIO.  Because of this the organization 
was accused of being a tool of American organized labor 
interests whose sole function in Mexico was to serve as an 
outside agitator.  In response the CFO repeatedly pointed out 
that its staff were all Mexican citizens exercising their 
right of freedom of association.  Because of the labor 
lawyer,s close ties to the PRD he was accused of trying to 
create political unrest in the city of Piedras Negras. 
 
A FUJIKURA CODE OF CONDUCT? 
--------------------------- 
¶10.  The CFO and the labor lawyer both made extensive use of 
Fujikura,s code of conduct in supporting the workers in 
their struggle with the company. Fujikura,s code of conduct 
states: "While contributing to the betterment of society, we 
at Fujikura shall continue to strive to earn societal 
recognition as a good corporate citizen, and shall not only 
conduct ourselves in accordance with not only the letter and 
spirit of all laws, but also act in conformance with the 
ethics and morals of society at all times and in every 
situation." The use of the Fujikura,s code of conduct does 
not appear to have had much impact on the company but it did 
gain the workers some unexpected support. 
¶11.  As the labor dispute which began in June dragged on into 
late August some lower officials of the CTM began to distance 
themselves from their senior leadership.  It is extremely 
rare in Mexico for lower level union officials to take public 
positions that differ from that of their senior leadership 
but in this case they were persuaded by the workers, the CFO, 
the labor lawyer and the discordance between Fujikura,s code 
of conduct and its actual behavior in Pedras Negras. 
 
IN THE END IT WAS ALL DOLLARS AND CENT 
-------------------------------------- 
¶12.  The high principals of Fujikura,s code of conduct 
notwithstanding, the dispute between the company and its 
workers was ultimately resolved through negotiation and a 
hard calculation of dollars and cents.  Although Fujikura 
 
MEXICO 00005406  003 OF 003 
 
 
claimed economic necessity compelled it to break its pledge 
with regard to the pre-existing collective bargaining 
contract and to resist the liquidation plus 20 days the 
workers were demanding, this claim did not hold up to close 
scrutiny.  According to a variety of media sources, 
Fujikura,s Coahuila plant was a profitable operation even 
before the company decided to lower its labor costs by 
getting out of its collective bargaining agreement. 
¶13.  That profitability ended when the labor dispute began. 
By early September both the company and the workers were 
feeling the financial pain and serious negotiations finally 
began.  In the end Fujikura agreed to pay the full 
liquidation benefits and offered an additional compensation 
of approximately USD 400,000 in lieu of 20 days the workers 
were demanding.   This added compensation amounted to roughly 
4.5 additional days of wages for each worker or 22 percent of 
their original demands.  The workers accepted the new 
Fujikura offer and dispute formally came to an end of 
September 16. 
 
COMMENT 
------ 
¶14.  One of the devices frequently pointed to as a tool to 
soften the harsher aspects of global competition is the 
corporate code of conduct.  It is, of course, impossible to 
generalize but in this particular case the corporation in 
question appeared fully prepared to ignore its code of 
conduct when it believed that by doing so it stood to achieve 
considerable financial gain.  Again, in this particular case, 
what mattered most was a desire by the company to return a 
profitable operation to profitability. Judged on that basis, 
what ultimately enabled the workers and the company to reach 
an agreement was a willingness (caused buy financial needed) 
on both sides to sit down and seriously negotiate. 
¶15.  This message was cleared with AmConsul Nuevo Laredo and 
AmConsul Monterrey. 
 
 
 
 
 
 
 
 
 
 
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BASSETT