Summary of the

Tentative Agreement

 Between

THE UNITED STEELWORKERS /

INTERNATIONAL ASSOCIATION OF MACHINISTS

And

Libbey Glass Inc.

September 18, 2020

To All USW/IAM Members at Libbey,

On June 2nd, management presented us with an extensive list of concessions they were seeking in order to emerge from bankruptcy.  By their calculations, these concessions amounted to over 26% of our wages and benefits in Toledo and 17% in Shreveport.

Your Union requested and received hundreds of spreadsheets and thousands of pages of documents in order to analyze the company’s sales, costs, profits, losses, and overall financial condition.  The conclusions drawn from that analysis are included in this summary, but we recognized that in order for the company to emerge from bankruptcy, the company needed to restructure its business and that would include sacrifices from the employees.

We believe this Tentative Agreement provides the investment from the employees that the company needs, balanced with our needs to have the best standard of living given the circumstances of bankruptcy.  These changes are painful, especially for our sisters and brothers in Shreveport, but the alternatives of facing the company’s demands for deeper concessions or the possibility of a labor dispute are more dire and put our members and their families at greater risk.

As you review this Summary, please note that your current Contract remains unchanged unless specifically modified by the Settlement Agreement.  This Summary provides an overview of the provisions of the Settlement Agreement and you may obtain or view a copy of the Settlement from your local union.

Throughout this process the key to avoiding the dramatic concessions demanded by management and the financial lenders, has been your support and unity with your bargaining committees.  Your support, and the dedication and commitment of your local union officers, has given the unions the necessary influence to fight off the demands that would have surely resulted in the failure of Libbey Glass. 

A ratification vote will be held based on one member, one vote. The vote will be conducted by each USW Local Union and the majority of the combined total of votes cast by USW members will determine the results. The IAM constitution requires Lodge 105 to vote separately, and our joint USW/IAM Committee recommends a YES vote for ratification.

 Your USW/IAM Negotiating Committee

Recent History of Libbey’s Business

Through 2019, Libbey endured several years of flat sales and declining profit margins driven by increasing import competition, mostly from China, and changes in the way that Americans go to restaurants. The company entered 2020 overburdened with debt which was rapidly coming due.  The company’s stock price had been declining for the past several years, and people were skeptical that the company would be able to refinance its debt.   The 200 year old company was on the brink of failure.

Then COVID hit. Forty percent of Libbey’s U.S. sales are to restaurants, and in a very short period of time, restaurants in the U.S. were closing or closed.  The combination of declining sales and fears of the ongoing impact of COVID caused the company to shut down both of its factories in the U.S. and lay off most of its employees.  The company faced significant cash issues and was forced to extend the payment of some of its debt interest.  Without the cash to make payments, Libbey ultimately filed for bankruptcy protection on June 1, 2020. 

The Unions and their financial advisors immediately engaged Libbey to understand the magnitude of the situation and the plan to get through the crisis.  In situations like this, the USW and the IAM carefully evaluate the needs of the company, the fairness of the actions it takes to meet those needs, and the likelihood of success of the company emerging as a sustainable employer for members in the future.

The Unions and their advisors determined that indeed Libbey did need both short and long term relief in order to emerge from bankruptcy.   The company expects much of its business to recover to pre-COVID levels by 2023, but it needs help with reducing its cash costs in the years between now and 2023 to survive until then. The company needs to eliminate legacy liabilities like pension and retiree healthcare in order to get a lender to finance that transition.

Because of the increase in imports and changes in the North American market, the company has determined that it needs to reduce its manufacturing footprint so it can focus its efforts on profitable and sustainable business rather than chase bad orders. Of the three North American facilities, Shreveport is the plant it can shut down with the least disruption to their business because of the overlap of Shreveport’s production capabilities with the other two plants.  Libbey has demonstrated that it has asked for help from all of its stakeholders and that the pain is not only being put on its unionized employees.   And perhaps most importantly, they put forward a plan that all of the various stakeholders will support.  Our financial advisors believe that this plan will succeed.

 Libbey’s First Proposal on June 2

On June 2nd, management proposed a long list of concessions that the unions determined were over reaching and unnecessary for the company to emerge from bankruptcy.:

a)      They demanded an immediate 10% wage cut, the elimination of the 2.5% wage increase in 2020, and the elimination of the 2.5% wage increase in 2021 that were negotiated in the Toledo CBAs last year.

b)      They demanded the elimination of all premium pay except for time and a half when employees work over 40 hours in a week (required by law). 

c)      They wanted to freeze the pension effective 8/1/2020, eliminating the shutdown pension, eliminating the 72 month guarantee from the pension, and immediately eliminating all retiree medical benefits.

d)      They wanted an increase in health insurance premiums for 2021 to match up with the rates for salaried employees, immediately doubling contributions.  In addition, they proposed the unilateral right to change employee premiums and prescription drug coinsurance and maximums to match non-bargaining employees going forward.

e)      Moving everyone to the new hire vacation schedule. 

f)       Eliminating the Dec. 26-29 holidays and proposing to allow management to schedule anyone to work on a holiday even if they didn’t volunteer.

g)      They wanted to expand the use of temporary employees in the Local 700T CBA. 

h)      Eliminating the tool allowance. 

The company told us on June 2nd that if they were not able to negotiate the above changes to the agreements, it would ask the bankruptcy court by the end of August to allow them to impose the changes; they filed a motion seeking permission from the court to do so on August 17th.  After many sessions with proposals and counter proposals, and after the unions made a significant counter proposal on September 11th, the company made an offer which was better than their June 2nd proposal, but still includes more concessions than we believe are necessary for Libbey to succeed.

The following summary compares this Tentative Agreement, which we are recommending for ratification, to management’s September 11th proposal, because if this Tentative Agreement is not ratified, the company will seek to have its September 11th proposal implemented through the 1113/1114 bankruptcy court hearings, which will begin on October 2nd.

 Term of Agreement

4 Year Agreement, with all Local CBAs expiring September 30, 2024

 Wages

The company’s proposal of September 11th still included a 10% wage cut through 1/1/2022, with a gradual restoration of those wages through 1/1/2024. 

This Tentative Agreement, if ratified, would reduce wages by 5% through 1/1/2024 and would provide two additional 2.5% wages increases as early as 2022 and 2023 if the company’s free cash flow (“snapback”) reaches certain positive goals, but irrespective of reaching those goals both increase and the 5% reduction will be implemented no later than 1/1/2024, in addition this TA has a minimum $15.00 per/hour floor.

Assuming a 1/1/2024 snapback, here are a few examples of the effect on wage rates:

*Local 65T had negotiated a $0.60 skill based wage adjustment effective 10/1/2021 that will remain in place.

This TA will save someone earning $20/hour over $2,000 in 2021 compared to the company’s Sept 11th proposal.

 Premium Pay

Their September 11th proposal still includes the elimination of all premium pay, except for hours worked on Sundays and holidays which would be reduced to 1.5x per hour.

This Tentative Agreement, if ratified, would keep all premium and overtime pay as currently provided for in our contracts.

Retirement

This Tentative Agreement does freeze pension benefit service effective 1/1/2023, although service for the purposes of eligibility, such as early retirement, will continue.  There would be no other changes to the pension plan, except if ratified, those affected by the pension freeze would increase the pension multiplier by $2 for all years of service if you retire on or after 1/1/2023. 

In addition, all bargaining unit employees will receive an annual 2% contribution into their 401(k) plan, starting in January 2024 based on 2023 earnings.

Retiree medical benefits will end on 1/1/2021, although we were able to extend this benefit until the end of the year, there was no way for us to retain it any longer. The cost of providing these benefits had grown to over $3 million per year and could possibly exceed $5 million per year with new retirements and the company’s plan of reorganization could not provide for the continuing benefit.

 Health Insurance

The September 11th proposal by the company still proposed major increases in weekly health insurance premiums, with family rates in 2024 being more than double 2020 rates.”  The increases would immediately be over 30% with 7% increases each year after 2022. 

This Tentative Agreement, if ratified, would reduce health insurance premiums compared to management’s Sept 11th proposal, especially in 2023 and 2024.  Although they are still higher than anyone would want them to be, in this agreement no health care option increases by more than $10 from one year to the next.  These are fixed increases and not subject to inflationary increases.

Prescription drug coinsurance and maximums would remain as they currently are in our contracts.  Shreveport workers would also move from the HMO to the PPO as defined in the CBA, effective 1/1/2021.

 Holidays

 The company’s September 11th proposal leaves the Dec. 26-29 holidays in the contracts, but continues to allow management to schedule anyone to work on a holiday even if they didn’t volunteer.

This Tentative Agreement, if ratified, would leave our holiday language as is in our contracts.  We would agree to continue discussions with management about how holiday scheduling needs might be better met going forward.

 Use of Temporary Employees (Local 700T)

 The company’s September 11th proposal still significantly expanded the use of temporary employees.

 This Tentative Agreement, if ratified, would leave the existing language unchanged and not expand the use of temporary employees.

 Other

 The Company’s September 11th proposal would convert Tool Allowance to a flat rate, taxable stipend.  This TA leaves the Tool Allowance unchanged.

 This TA would eliminate 1 NSC Operator position per shift in Toledo as well as some other position changes as proposed by the local unions and would suspend COLA for the duration of the agreement.

 Shreveport Closure

The company announced the closure of the Shreveport manufacturing plant on July 8th.  Although we carefully researched their sales and financial records and challenged management’s analysis as best we could, ultimately we could not find enough evidence to prove that Shreveport should be kept open.

Furnace A is expected to shut down sometime around the end of October and Furnace C is expected to shut down sometime around the end of December.  The company intends to continue operating the Greenwood Distribution Center and those workers will continue to be covered by the Local 711T CBA.

Severance pay will be provided to eligible employees in the amount of 25 hours of pay per year of credited service, up to a 750 hour maximum.  Severance pay will be paid out in weekly increments of up to 40 hours as a wage continuation.  While we understand that this will delay Louisiana unemployment compensation benefits, the payment of lump sums instead of a wage continuation was not possible because of the cash flow needs of the company.

Employees who are laid off will be eligible for up to 6 months of health insurance continuation, per the current CBA.

The CBA language providing for an unreduced pension in the event of a plant closing remains in place.  Employees eligible will receive an unreduced pension if you are under the age of 60 and have at least 30 years of service at the time of the closing.  Since someone age 55 and over who has at least 30 years of service already qualifies for an unreduced pension, the plant closing pension is really only relevant to those under age 55 and have at least 30 years of service.  Approximately 10 employees in Shreveport fit into this category as of June.

Recall rights for affected employees will be extended for one full year beyond the 3 year period provided for by the CBA.

Laid off Shreveport workers can sign up for a Preferred Call List for openings in Toledo.  If an Operator, Electrician, or Millwright signs up for the Preferred Call List and accepts a position in Toledo, they will be eligible for up to $15,000 in bonuses depending on how long they stay.

The company agrees to cooperate with the Union to petition for Trade Adjustment Assistance in order to secure additional benefits for affected Shreveport workers.