UAW Downsizes Its Own Company

0 Comments | Insight on the News, August 9, 1999 | by Michael F. Munday

Choate looked to a number of institutions with the resources to take on the hoped-for $10 million investment necessary to turn People's Network into a major national radio and cable-television player. In the UAW, Choate believed he had found a business partner who not only had the capital to make the deal happen but also the commitment to promote American products. Not so incidentally, the UAW also presented a huge market with disposable income for "made in USA" products.

The UAW brought $5 million to the table, which according to plan was the minimum to launch the new operation. A Choate-led management team, Experienced in the business of broadcast and direct sales, would run the day-to-day operations. The deal was set in April 1996. Almost from the start, the UAW showed dissatisfaction with operations.

The union had insisted as the price of the deal that it have an effective veto through the board of directors as part of the terms and conditions and corporate bylaws. That quickly resulted in UAW direction of even the most ordinary UBN business and programming decisions.

But through the summer of 1996, UBN was making money. "We were getting more orders than we ever had before and shipping plenty even through July," recalls Pam Brewer, an order-center processing worker at UBN. In the first 10 weeks of the UBN operation, sales of products promoted on the air were up, and plans were set for a catalog of "made in USA" items to be sold through a national distributor system. Distribution of daily programming also was up, and new on-air talent, including Texas populist Jim Hightower and Washington insiders Michelle Laxalt and Martin Tolchin, had been signed for Labor Day starts to further boost UBN audience share and direct- and catalog-product sales.

Harder, however, continued to take President Clinton to task. With the presidential-election campaign in full swing, that was something the UAW wanted stopped. The union pressured Harder to take an "extended vacation" until the end of the election. And because the purchase of Harder's People's Network had not finally closed, Harder apparently became anxious that the UAW might not live up to its deal with him. He left UBN on Sept. 1, 1996, with the UAW forcing him to take a two-month "leave of absence" from the air and to give up his 25 percent stake in the new network. Tied up in Big Three negotiations, the UAW stalled on the agreed UBN payout for Harder of roughly $3.5 million and subsequently renegotiated with a by-then irate and financially pressed Harder for $750,000 less, but eliminated a no-compete clause in his contract. Very quickly, Harder set up a new network with approximately a third of the affiliate stations from UBN.

At the same time as Harder's role in UBN operations was changing, Choate had been approached by Ross Perot to run on the Reform Party ticket for vice president. Choate's decision was delayed while the new deal with Harder was finalized. When Choate told the UAW he planned to accept Perot's invitation, Steve Yokich, International president of the UAW, responded furiously. According to Yokich, internal UAW polls showed Perot running strong in swing industrial states such as Michigan, which might pull enough votes from Clinton to give the election to Bob Dole. "The UAW is now putting money into a radio network whose leader is running hard against the [Clinton] White House!" an exasperated Yokich shouted at Choate. "How the hell do I explain this to Harold Ickes [manager of the Clinton reelection campaign]?"