Paradise tossed; how a chance to save American capitalism was sabotaged at Eastern - Eastern Airlines

Washington Monthly, June, 1986 by Alex Gibney

Meanwhile, the banks were being typically rigid. Although they forced Borman's hand to sign the 1983 accord, it was not out of a love for workplace democracy. When pressed, Citibank was willing to give on the issue of control. It was not willing to give on wages. Citibank had wanted wage cuts in 1983 and by early 1985 it wanted more. During the first eleven months of 1984, Eastern had a $168 million operating profit. But the airline's debt payments turned the bottom line ink for the year from black to red--a loss of $37.9 million. Eastern's bankers demanded a 1985 business plan that would reflect 2 percent profit in order to protect their loans.

Finally, there was the suspicion among many unionists that deep down, Borman couldn't bring himself to believe in the principles of the agreement. Perhaps unfairly, they pointed to his military training at West Point, and his subsequent career at NASA as evidence of his authoritarianism. To this day, Borman's nickname is "the colonel.' "West Point doesn't teach you to solicit all the privates to find out how you want to go over the next hill,' said District 100 vice president Russ McGarry.

John Simmons, president of Participation Associates of Amherst, spent several days observing Borman in 1985 and believes the CEO has genuine egalitarian strains. He notes that Borman abolished all symbols of executive privilege--golf memberships, the company jet, the practice of company carpenters doing executive renovations--and installed the first profit-sharing program in the airline industry. He prided himself on buying his suits off the rack and driving to work in a second hand Chevy. Simmons recalled two meetings that illustrated both Borman's authoritarian strain and his desire to reform. In January of 1985, Borman held a meeting to solicit the views of middle managers. But during the question and answer session he periodically cut off people before they had finished asking their questions. "I don't realize that I do that. I have heard so many of the questions before--I just start to answer them,' he said when one manager later confronted him about it. At the next meeting, the questions were tougher and more persistent, but this time he replied with concern and grace. "And I didn't cut anybody off, did I?' asked Borman. "There were several times that I almost did but caught myself.' Others, more wary of "the colonel,' said the "perk bashing' tendencies were evidence of the spartan ethic of boot camp which insists that the commanding officer share the same harships as "his' men. "He wants the company to survive,' said McGarry. "In his heart he believes in the people in the company. Yet he's afraid to ask for their help, because he thinks it deletes from his power.'

"A treacherous act of betrayal'

Whether out of a reluctance to cede power, or because he was facing such strong pressure from the banks, Borman made the first fatal mistake that would lead to the demise of the agreement. He decided to renege on the provision in the original contract that would restore wage custs by December 31, 1984. When that day came, Borman, without consulting the unions, unilaterally extended the pay cuts, saving the company $22 million per month.