What Will Caterpillar Do About Its Labor Problem?

Union machinists at Caterpillar’s (NYSE:CAT) Joliet plant walked off the job this morning after rejecting a six-year contract that called for “wage stagnation” and higher healthcare premiums. About 800 workers making hydraulic components and systems for Caterpillar machines were covered by the contract that expired after midnight, having already rejected the new contract on Sunday.

Caterpillar said it was prepared to use managers and retirees to maintain production after a whopping 94 percent of union members rejected its contract offer and approved going on strike. According to Steve Jones, an official with the Local 851 of the International Association of Machinists, though the union has informed Caterpillar that it’s willing to meet, no further negotiations are currently scheduled.

Caterpillar spokesman Rusty Dunn said that, though the outcome of the contract vote was “unfortunate,” production would continue. “The Joliet facility will continue to work safely, meet production levels and conduct business as usual as we focus on meeting customer needs,” Dunn said. “Caterpillar has work plans, processes, policies and people ready to be deployed in the event of any business interruption, whether it is a tornado, fire or a strike.”

IAM workers at the Joliet plant produce hydraulic components and systems for a variety of Caterpillar machines, including mining trucks and tractors. The labor dispute comes as Caterpillar is scrambling to boost production to meet growing demand in North America.