Smithfield workers wary over China deal
MEAT PROCESSING BEHEMOTHS
Shuanghui International, China’s largest pork producer, has agreed to buy U.S.-based Smithfield Foods, the world’s largest pork producer. Key facts:
Gregg Zoroya and Calum MacLeod, USA TODAY9:59 a.m. EDT June 26, 2013
(Photo: H. Darr Beiser, USA TODAY)
· American, Chinese meat processors share a willingness to work hard
· But China wages much lower than U.S. payments
· U.S. workers’ reaction to takeover news? ‘Apprehensive would be the right word’
Thick hands and muscled forearms acquired from hours of fast-cutting hog meat mark pork processors on either side of the Pacific.
American and Chinese workers in vast industrialized meat-processing plants also share a willingness to trade a life of backbreaking work for a taste of upward mobility, if only a taste. And, most important, a dream: that their children never have to work in places like these.
But stark differences between U.S. and Chinese meat workers emerge in the wake of the news last month that Shuanghui International, China’s largest pork producer, has agreed to pay $4.7 billion for Smithfield Foods of Virginia, the world’s largest pork producer. The deal’s total valued with assumed debt is $7.1 billion.
Interviews with workers at meat plants in both countries illustrate the dollars-and-cents contrasts between the same jobs in the USA and China. Keenly aware of those differences, American workers worry what the future will bring.
In 39 years, Ross Iversen has worked his way from the kill floor of Smithfield’s Farmland Foods processing center in the American heartland to boning hams to the smokehouse. He has paid off his home and put two children through college. He poses proudly beside his new $30,000, GMC extended-cab pickup.
The Shuanghui (pronounced Shuwang Hway) deal worries Iversen. "Well, I’m sure they (the Chinese) are going to send somebody over here to keep an eye on things," he says, "and I would think he or she would probably have their own ideas on how things are done."
In rural Tangshan two hours east of Beijing, Guan Shengyong, 29, piles his wife, son and parents into a $10,000 VW Jetta, the first car anyone in his family has owned.
At the 1,800-worker Shuanghui plant where Guan cuts pork, average income is $500 a month.
Workers from Smithfield Foods’ Farmland processing plant in Denison, Iowa, talk about their lifestyle and their reaction to the company being purchased by the Chinese. Video by H. Darr Beiser, USA TODAY
That’s less than the typical $650-$700 weekly earnings, not counting benefits, in Denison, Iowa, at the Smithfield-owned Farmland Foods factory that counts Iversen among 1,600 employees.
Leo Kanne, head of Local 440 for the United Food & Commercial Workers International Union in Denison, says folks earn enough to take their kids to Pizza Ranch every week, maybe the Dairy Queen, and go on vacation once a year.
"That’s all these people want," he says. "Nobody is getting rich working in these plants. It’s a decent living. It’s honest work. It’s hard work. It can be brutal work."
Behind Smithfield CEO Larry Pope’s boast that the Chinese deal means "exporting America to the world" are places like this town of 8,300 in gently rolling farmland where the slogan on the water tower promises: "It’s a Wonderful Life."
That’s from the 1946 film classic starring Denison native Donna Reed, who died in 1986. People say the message still rings true.
The jobless rate is below 5%. Median household income is $44,000. There’s a new hospital and middle school. Crime is nearly non-existent; people do not lock their doors. Recent lawbreaking included the theft of three Pomeranian puppies.
The water tower badly needs a new paint job, and the biggest debate in town is whether to replace the old slogan with the name of the high school mascot: the Monarchs.
The largest employer by far is Farmland Foods, an alabaster sprawl of chilled processing caverns on the town’s northeast edge near the stock car race track.
From the kill floor — where employees say temperatures reach 110 degrees in the summer and the smell of human sweat mixes with every possible odor of swine offal — to the cutting floor and its 42-degree refrigerated cacophony of conveyor belts and saws, more than 1,100 hogs are processed every hour.
This is where Frank Chavez, 31, met his wife, Alma, 33, back in 2002, the year Smithfield bought Farmland. She stopped to ask him directions to the kill floor. They got married four months later.
Pork cutter Guan Shengyong, 29, at the gate of his village home in Chenjiapu Town, Hebei province, a two-hour drive from Beijing in northern China.(Photo: Calum MacLeod, USA TODAY)
Frank, a native of El Salvador, and Alma, raised in Mexico, were among a wave of immigrants flooding the Midwest during the 1990s and early in this century, seeking lower-skilled jobs in food processing.
Today, Latinos and others from Sudan, Burma and elsewhere account for more than half the jobs at Farmland, and 46% of the town’s population.
For the Chavezes — he works a line where pork bellies are salted, sliced and packed; she’s in the supply exchange office — it offered a piece of the American dream.
After two years of employment, they established enough credit through Bank Iowa to buy a 19th century home for $83,000 and $3,000 down, just up the street from the gabled Hartwig House mansion, one of the town’s plushest homes.
"It’s been really good for our family," says Frank. He and Alma have a son, Mario, 11, and daughter, Lesley, 9. "The kids really like the schools. It’s a safe place to grow up."
WAVE OF ANXIETY
When word of the Shuanghui deal broke on the processing floor May 30, the anxiety level here was palpable.
The union had negotiated a four-year contract last September. Would the Chinese honor it? What about pensions and the current 401(k)?
The contract guaranteed a minimum 36-hour workweek regardless of seasonal trends, and it locked in wage increases and modest hikes in health insurance premiums.
"People are just a little bit concerned. Apprehensive would be the right word," says local president Kanne, adding that Farmland company officials assured them the contract would be honored. "What happens after that is anybody’s guess."
Wan Long, Shuanghui’s chairman, "has already promised ‘no changes,’ " says Chen Wei, executive vice president of the official China Meat Association. "I think this should provide the U.S. side with a pill of reassurance." The pledge includes no worker layoffs or factory closures in the USA.
The proposed Shuanghui deal, the biggest-ever acquisition of a U.S. company by a Chinese firm, is subject to national security review by the U.S. Treasury Department’s Committee on Foreign Investment in the United States.
Many in Denison think the deal could mean even more work and more overtime. "That’s a good thing," says Dana Jahn, 54, who runs a pallet-moving carrier at the plant and lives in nearby.
But the Chinese owners also might cut pay or squeeze more processing out of an hour of work after the contract is up, Jahn fears.
Workers already bear the scars of the work pace — herniated discs, replaced knees, countless wrist scars from surgery to correct carpal tunnel syndrome from repetitive movements.
Headquarters for the Food and Commercial Workers Union quickly released a statement listing accidents that have plagued China food processing — a recent poultry plant fire that killed more than 100, another in 1991 where 25 died — and touted how union workers are empowered to spot safety hazards.
Shuanghui and Smithfield say the acquisition means products moving in one direction — more U.S. pork shipped to China to feed a growing middle class.
But in the back of many minds here is a fear that supporting their modest lifestyles in Denison someday might be more than Shuanghui wants to pay to process pork.
"Everything I’ve read about it, is that (the deal) is because the Chinese don’t have good quality meat," says Sherry Hottendorf, 47, who works various jobs on the processing floor. "If that’s their intention, fine. Give ’em good food to eat. I don’t have a problem with that. But in four years (when the contract is up) I still want my job."
"I’m not getting rich by any means. But I’m paying the bills," says Jahn, who’s put 30 years into Farmland. "I’ve got a nice little acreage out in the country. I’m a member of the golf course. … I plan on retiring right where I am, and I hope the Chinese buyout doesn’t change any of that."
In the USA, many workers take for granted the respite a two-day weekend affords. In China, pork cutter Guan Shengyong is grateful to enjoy two days off — per month. That’s a concession that factory management granted two years ago, he says.
Another promise from above also wins Guan’s approval. By 2016, his monthly wage will rise to at least $800, from $500 currently. "I was happy to hear this," says Guan, just 29 but already an 11-year Shuanghui veteran.
Limited worker benefits and relatively low salaries partially explain how Shuanghui, which markets its brands as Shineway in English, grew so big, so fast that it now plans to swallow the world’s largest pork producer, Smithfield Foods of Virginia.
At Guan’s processing plant in Tangshan, about half the 1,800 workers live in six-person rooms in dormitories on site. More will come when an additional facility is added this year, because China’s economy still enjoys impressive growth, unlike the USA and Europe. Shuanghui is investing heavily to expand facilities in northeast and southwest China.
The company’s ambitious growth strategy is fueled by rising living standards in China that translate into widespread hunger for more meat at mealtimes. Shuanghui’s workers have aspirations their U.S. counterparts will recognize. But not the pace at which they achieve them.
Rows of cars Guan says employees bought in the last two years stand outside the Tangshan plant. For their first ride in his VW Jetta, Guan ferried his parents, wife and son to visit relatives a few hours away. "I felt good when they congratulated me. None of them owned a car then, but they do now," he says.
Guan dismisses anonymous complaints on online bulletin boards about long hours, low pay and strict discipline at the plant. "I feel satisfied with my life," he says. "Before I worked longer hours, for less pay, and had no days off at all. Now my salary has gradually risen, and I have two days off a month."
Guan saves about half his salary. He lives in the house he and his farming parents built after the government moved them and other families here in 1999 from a region that was going to be flooded by a dam project. His wife signed on this month to return to work at the plant. But he hopes their son, Guan Wudi, 7, will not follow their footsteps.
"He says he wants to be a policeman catching thieves," Guan says. "I tell him he must study hard. I want him to go to university in Beijing; he can choose the subject, as I’d like him to be a white-collar worker, in an office, so he won’t be too tired."
The Smithfield purchase makes Guan proud. "I heard the news as my wife and I watched television," he says. "Shuanghui has more power now, it can buy a U.S. company. This shows how China is developing so much and so quickly."
Food-safety worries are rife across China after multiple scandals in recent years. Shuanghui apologized to consumers and withdrew products after a 2011 television exposé revealed use of an illegal additive to produce leaner pork. Like all pork producers in China, Shuanghui does not breed most of its own pigs. Thousands of dead pigs floating in a river near Shanghai this March offered a stark reminder of widespread lax practices.
Guan insists that Shuanghui is different, with regular training on food safety, checks of the pigs delivered for slaughter and tight hygiene. That includes uniforms washed daily, an "air shower" room to blow off employees’ loose hair, disinfecting of hands, boots and knives, and a check for cigarette lighters, lest workers try to flout the no-smoking rule.
He works a daily eight-hour shift, leading a team of six on a production line of 30 workers that cuts up the central section of the pig. They generally process 1,000 per shift, but they can up their output to 5,000 when demand peaks ahead of Chinese New Year. "American consumers can be confident in our product quality," he says.
"American workers should not worry about Shuanghui imposing new work conditions. Shuanghui’s profits are so high they don’t need to cut salaries in the USA."
All workers get one free meal per day at the staff canteen, including pork dishes. As is common in China, they also receive an extra month’s salary at Chinese New Year, when Shuanghui workers enjoy 10 days off.
Guan has enjoyed incentive reward trips to the seashore and the Great Wall that Shuanghui offers its most productive workers, such as the fastest and best pork cutters.
Wang Zhitao, 24, has worked at Shuanghui for only five months, monitoring refrigeration equipment, and doubts he’ll stay as long as Guan, but he appears satisifed with work conditions and a starting salary of $450 per month. He lives in a company dormitory, divided into male and female sections. His room has three bunk beds, an electric fan, heating and a television, and the company encourages lights out at 10 p.m.
"My parents are happy I have this job, as it’s not tiring, and Shuanghui is a famous firm," Wang says. "My dream is to own a house, in the city or the countryside, I don’t mind where, just somewhere to live a good life. I also wish I could earn enough money so my parents don’t have to work, but I don’t have that opportunity yet." His mother works in a rubber factory, his father in a steel mill. "The conditions and the smell are bad, and it’s tiring, physical work; it must affect their health," he worries.
Guan intends to stay put at the Tangshan plant. He dreams of a promotion to run the production line. "Shuanghui and China grow stronger and richer; it shows China can face the world. In the future, China will definitely be as good as America," he says.
In return, Guan looks forward to Shuanghui adopting at least one Smithfield practice. "I hope in the future we can have two days off per week."
Zoroya reported from Denison and MacLeod from Tangshan. Contributing: Stephanie Zhou in Beijing