A little history lesson – plus some stark economic reality – is all that’s needed to explain why Rio Tinto is refusing to enter into wage negotiations with the union that represents some of the train drivers at its rich iron ore operations in the Pilbara in north-west Western Australia.

The hardline Construction Forestry Mining and Energy Union (CFMEU) is organising protected industrial action by 39 of Rio’s 315 train drivers following an Australian Industrial Relations Commission-approved ballot. The workers can legally stop work because their Australian Workplace Agreements (individual contracts) have expired.

They will down tools for 12 hours tomorrow (Saturday), and will continue to halt work for varying, short periods to pursue an annual wage claim of 4.75 per cent, as well as $20,000 for employees affected by Rio’s plan to introduce driverless trains in the Pilbara by 2012.

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Rio’s response was as quick as it was predictable; it is offering train drivers a non-union collective agreement – and it refuses to enter into talks with the CFMEU. The simple fact that every disrupted train delivery from the mines to the ports of Dampier and Cape Lambert costs Rio an estimated $2 million must be weighing heavily on management’s mind.

So too will the fact that Rio has enjoyed 16 years of zero industrial action in the Pilbara; from its perspective the price of talking to the CFMEU is simply too high. Managers with long memories will remember strikes in the Pilbara over issues as trivial as the colour of the ice cream in the canteen.

The issue that prompted the last dispute in the early 1990s, which ushered in the non-union wage agreements, was Rio’s refusal to sack a worker who did not hold a union ticket. In a subsequent ballot of the workforce nearly 90 per cent of workers across Rio’s Pilbara operations turned their backs on the unions and elected to enter into individual contracts.

Unions don’t want to discuss it now, but they had lost the workforce. The endless strikes had nothing to do with ideology, and very little to do with the workers’ wages and conditions. It had everything to do with the egos of the union officials, especially those on site, and inter-union rivalry.

But if unions had lost the workforce, the Rio management of today should be asking itself why, after all those years of little union involvement, do some employees now want the CFMEU back in the tent.

Wage estimates for train drivers range from $160,000 (the union figure) up to $210,000 (Rio’s figure). They are hardly living on the breadline. But they still want a union-negotiated collective agreement. It’s hardly a raging endorsement of Rio’s management, especially if other drivers want the CFMEU involved as their AWAs expire.

This industrial action could not come at a worst time for Rio alongside an increasingly grim economic outlook. The global financial crisis will have an adverse impact on its major markets for iron ore – the big economies of Asia. No one knows how much China, in particular, will be affected, but a commodity driven Australian dollar that’s now trading below 70 US cents from a high of nearly $US1 is a sure indicator that the markets expect iron ore prices to weaken.

If another indicator is needed, the collapsing Fortescue Metals’ share price is instructive; since June this year this (former) market darling has seen the price of its stock plunge from more than $12 to yesterday’s close of $3.30 – a dramatic fall from favour reflecting the risk that it will not fare well in a low-price environment. This is a major turnaround from just a few months ago, when rising iron-ore prices looked set to make lower grade iron ore projects look viable.

It’s far too soon to be predicting a return to the bad old days of endless – and mindless – industrial activity in the Pilbara; the 39 train drivers are a minority.

But Rio’s management is on notice. Despite all the union outcry over the Rudd government’s industrial relations framework being “Work Choices Lite”, the new IR environment is giving the CFMEU an opportunity to get its foot firmly back in the door in the Pilbara. The respective claims of both unions and management that they have truly won the “hearts and minds” of this highly paid workforce are about to be tested.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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