- Oshkosh Corp has been a rare lifeline for the beleaguered United Auto Workers, one of the few American manufacturers to have added significantly to its ranks of well-paid union workers in a brutal decade for factory hands.

But now, as the UAW renews conciliatory contracts with major automakers that have dismissed tens of thousands of hourly workers, union employees are turning against Oshkosh.

Tim Jacobson, 32, is among the workers who have rejected a new contract forged by union leaders with the maker of military vehicles and fire trucks. They are marching in the streets of this university city on Lake Winnebago to denounce an employer that has nearly doubled its UAW staff to 3,100 over the five-year span of its last union contract.

Jacobson himself was hired by Oshkosh two years ago, less than a month after he was laid off from a nearby Harley Davidson plant.

What's disgusting? Jacobson shouts, carrying an American flag as he leads a line of 150 workers at a recent rally downtown. Union busting, the crowd responds.

This seemingly paradoxical labor standoff stems from grievances almost unique to Oshkosh, whose profits have been flush in recent years, and from a broader animus between labor and management, both nationally and in particular in Wisconsin, where a clash over the power of public-sector unions transfixed the country over the summer.

Frankly, a lot of people here are pissed off, Jacobson said. Workers complain that the new contract erodes work rules, security and seniority rights - such as a demand that workers can be required to work up to ten Saturdays per year. Particularly galling to them is the company's call for more temporary, non-union positions. When Oshkosh sought union approval to hire as many as 300 temporary workers starting in 2013 as part of its original contract offer, the workforce rejected it.

The most recent rejection, on Saturday, was the second in a week. The company had offered as much as an 8.5 percent raise and $2,000 signing bonus to offset to rising healthcare premiums. Oshkosh had attempted to craft a similar deal in 2010, a year before the contract's expiration, and met resistance then as well.

An outright strike is unlikely. UAW and Oshkosh officials returned to the bargaining table on Wednesday. A third deal, without any demands for temporary worker provisions, will likely be handed to workers this weekend, according to people familiar with the talks. These people expressed confidence that the third attempt for ratification will work.

But with protestors on the streets of Oshkosh, Wisconsin where even the deep erosion of the industrial heartland has been kept at bay, the thread of distrust sewn into labor-management relations is proving difficult to sever.

Oshkosh's desire to bring in temps follows a pattern set by most of the nation's industrial heavyweights, such as Caterpillar Inc, who want to meet shorter-term production needs without having to bring on another crop of permanent employees. Workers here firmly believe this will lead to an inevitable loss of union jobs.

Our members have been getting very angry out there, UAW Local 578 President Nick Nitscke recently said while standing in the lobby of the Oshkosh hotel, the site of the labor negotiations. He pointed to a street corner where hundreds of workers have protested several times in recent weeks. They do not want anything to do with temp workers.


This schism between the workers and their union has many outside observers scratching their heads, coming as it does with the rest of the country plagued by economic malaise.

Oshkosh has been on a roll thanks to winning big contracts to build military vehicles in recent years, though it now faces new headwinds as government-spending cuts and increased competition squeeze the defense industry. Management has been hitting this theme hard.

In a letter accompanying its first offer to UAW workers last month, Chief Executive Charles Szews said, the company's offer takes into consideration today's economic realities for our principal customer, the U.S. Department of Defense, which is facing hundreds of billions of dollars in budget reductions. Workers are largely dismissive of that outlook.

Like many others in the area, Rep. Gordon Hintz, a Democrat representing Oshkosh, sees the current conflict as at least partially influenced by the protests over public-sector unions that polarized public opinion, just 87 miles to the south in Madison. The Occupy Wall Street movement is also energizing workers, he said. Does Wisconsin have picket fever? Yes, I think there is a little of that.

A broader anxiety is also underpinning the workers' resistance, says Mike Schroeder, a longtime Oshkosh worker recently elected as a chief bargaining steward. People have not gotten the entire story of what is really going on here. This isn't really about money, he said. This is about job security.

A significant portion of Oshkosh's workers here were hired as the company was scrambling to fill orders from the Department of Defense, while other Wisconsin manufacturers -- including Kohler Co., Harley Davidson, and Mercury Marine - were laying people off and, in some cases, hiring more temps. As a result, Oshkosh was able to hire skilled manufacturing workers who harbored a deep resentment toward non-unionized employees doing short-term work.

Jacobson, who worked in a Harley Davidson factory for seven years, is one such employee. I was laid off from Harley on September 25, 2009, he said. Two weeks later, after applying for a job online, he went to work in an Oshkosh factory. I don't want to go through that again.

Harley didn't actually negotiate a temporary worker deal with its union until after Jacobson left, a spokeswoman said. The company has yet to hire temps due to a lack of market demand, she said.


Oshkosh Corp. is a key cog of the local economy. Had it not been for Oshkosh Corporation and the success they had in the defense sector, this region could have been in serious trouble, said John Casper, president of the local Chamber of Commerce. State and city officials recently authorized hundreds of millions of dollars in economic incentives to encourage Oshkosh to keep key defense work in the region.

Even facing headwinds, the company's impact on job creation in the community is wide-ranging. This spring, more than 3,000 people packed into the local convention center, where Oshkosh was holding a two-day job fair to fill up to 750 jobs, all of which went to the UAW.

Since Oshkosh signed its last contract in 2006 with the UAW, revenue has more than tripled, hitting $9.8 billion in 2010, with operating profit nearly quadrupling to $1.4 billion, although Wall Street estimates suggest those numbers are falling in 2011 due to softness in defense spending.

A contract to build billions of dollars worth of M-ATV and F-MTV military vehicles fueled the boom, allowing Oshkosh to wipe away much of the debt it took on when it purchased aerial-lift maker JLG Industries Inc. in 2006. That acquisition was intended to help Oshkosh diversify away from its core military business. Oshkosh also makes heavy vehicles for municipal use, such as fire and garbage trucks.

But with more than $1 billion in long-term debt, the heavy reliance on defense contracts for operating profit has turned one of the company's best sources of optimism into become something of an Achilles heel. Its signature M-ATV is now nearing the end of a hugely profitable production run, and its new bread-and-butter military vehicle, the F-MTV, has failed to turn a profit.

In its earnings call in July, Oshkosh said the vehicle will be profitable in the fiscal second quarter of 2012, later than initially expected.

There's been a great recognition that defense contracts are running off, JP Morgan equities analyst Ann Duignan said in a telephone interview. She said the defense industry is stuck in a brutal cycle and you could almost say absent another new war we could be in a secular (defense) decline that could accelerate Oshkosh's issues.

Shares of Oshkosh have suffered under the weight of these concerns, sinking nearly 50 percent this year. Some on Wall Street have speculated that the company's market value - falling from a 52-week high of $3.6 billion to about $1.7 billion currently - makes it an attractive takeover target.

Billionaire investor Carl Icahn reported owning a 9.51 percent stake in the company over the summer, saying in a federal filing that he would meet with management to enhance shareholder value. Icahn did not return calls and emails requesting comment.


Dissent isn't a new phenomenon for the UAW. In Detroit - home of the union's core constituency - workers have shown a willingness to vote down automaker contracts in even the worst of times. And now, as Ford Motor Co seeks ratification for a new deal that includes lucrative bonuses, there is widespread concern that workers there will vote no. As of Thursday, two Ford factories had rejected a proposed four-year deal, throwing its ratification into doubt.

But in many ways, Oshkosh feels light years away from the troubles of Detroit.

Unlike other Rust Belt communities in the Midwest, the City of Oshkosh has been a pocket of relative stability. The Fox Valley has benefited from diversification efforts that the business community employed after the collapse of the region's paper industry decades ago. Employers Kimberly Clarke Corp. and Gulfstream are two big ones that continue to invest.

For the City of Oshkosh, the presence of a state prison and the University of Wisconsin Oshkosh provide an added layer steady employment. Local officials say unemployment is trending lower than the state average. But recent developments in Wisconsin's public sector have shaken confidence.

There's a lot of uncertainty, and I would even say fear around here, said Tom Willadsen, pastor of First Presbyterian Church in Oshkosh. We have university professors who effectively had an eight percent pay cut because of a health care increase.. These people were hit very hard, and hit very suddenly, and clearly there is a sense that unions are under attack.

That uncertainty has spilled directly into the private sector, leading to talk among Oshkosh workers about perceived threats to job security.

A lot of people even spend a lot of time on Facebook dealing with this, said Shawn Cronin, a 27-year-old father of two who joined Oshkosh while in the National Guard. Cronin, who said he suffers from post-traumatic stress disorder after serving overseas, complained that Oshkosh managers change shift start times in defiance of union objections. Union members said they have more than 2,000 grievances outstanding against the company, Cronin said, including alleged abuses of the Family Medical Leave Act.

Company spokesman John Daggett said the number of grievances is part of normal process and not reflective of our good relationship with the union and its members. The company has recently hired additional human resources staff to help resolve outstanding problems, he said.

But really, my issues are one small pinhole in a much bigger wall, Cronin said. The bottom line in all these conversations is that many of us just don't trust management.

(Reporting By John D. Stoll; Editing by Mike Williams and Chris Kaufman)