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A showdown between the United Food and Commercial Workers (UFCW) and Safeway’s Dominick’s division in Chicago seemed inevitable as almost 9,000 chain employees voted yesterday to authorize a strike if the company does not meet their demands for higher wages and improved healthcare benefits.

The vote came even as Safeway’s CEO, Steve Burd, reiterated his intention to close or sell the stores if the union did not accede to the chain’s demand for concessions that would allow it to be competitive with Albertsons’ Jewel division. Burd promised on Friday that striking workers would not be entitled to severance pay or benefits.

The union said it wanted to continue negotiations with Safeway, though as of this morning no talks seemed to be scheduled.

Other news of note in the dispute:

• While Burd has said he believed that a shuttered Dominick’s would not necessarily be attractive to potential buyers, the UFCW said it had been in contact with three “major” industry companies that were interested in acquiring Dominick’s. However, the UFCW conceded that there are no guarantees about an acquisition of the company if Safeway puts it up for sale, or that a new owner will accept the union’s proposals for a contract and work rules.

• Safeway’s stock price sunk to a five-year low, affected not just by the Dominick’s situation, but also by expectations that a planned Wal-Mart expansion in California will be very bad for business.

• At the end of last week, Safeway offered high seniority unionized employees buyouts, based on seniority and rate of pay, in order to reduce its long-term costs.

Safeway bought Dominick’s for $1.8-billion four years ago, believing that it would help the company build sales and profits at a time when consolidation was deemed desirable. However, things have not gone as planned. Safeway says it is because costs are out of line, and the unions charge it is because Safeway has arrogantly gotten rid of the local products and flavor that used to make Dominick’s unique.

Safeway told analysts on Friday that it plans to be more competitive by reducing prices, building its perishables operations, and maintaining what it views as its private label and signature product advantages.
KC's View:
Safeway’s comments to analysts would suggest that it does not believe what MNB users have been saying repeatedly since this story broke – that in certain markets, private label signature products aren’t necessarily an advantage, that they only serve to heighten a corporate profile that isn’t seen as all that positive.

As of this posting, Safeway hasn’t responded to the strike authorization vote, but that could happen any moment.

Will Safeway close or sell the stores, even if it can’t recoup its original $1.8 billion investment?

Hard to believe that it would…though this is corporate hardball at its most fierce. At this point, what kind of credibility would Safeway have if it backed down?