`A MAJOR milestone in the history of American business.''
That's what Labor Secretary Robert Reich called this week's employee buyout of United Airlines. The question now is whether it will be a milestone toward fortune or ruin?
United will become one of the largest employee-owned businesses in the world. As a result of the $4.9 billion deal, some 54,000 employees will own about 55 percent of the company and wield veto power on the board of directors.
It is a huge risk for the airline, which has struggled recently to make money in a cutthroat industry. Since airlines were deregulated in 1978, passenger fares have been sliced by one-half in inflation-adjusted dollars.
Short-term, the buyout will be a boost for passengers. United reduced its operating costs significantly by trading pay cuts for stock. The move is sure to ignite another round of airline fare wars.
To succeed, United must truly involve employees and instill them with an owner's sense of pride and a stake in the future of the business. It must lure flight attendants, who so far have held out, to join with the pilots, machinists, sales agents, and other workers in a ``united'' effort. Surveys show customers expect a higher level of service from employee-owned companies; United must deliver on these expectations.
A commitment not to cut jobs over the next six years puts United at a disadvantage if the industry hits a downdraft. Competitors such as Delta already are trimming costs by laying off workers.
Many other large companies - Avis Inc., Polaroid Corporation, and Procter & Gamble Company, for example - are among some 9,500 firms with employee-ownership plans. They represent a radical form of the worker-empowerment movement, which attempts to replace old management-labor antagonisms with a spirit of cooperation. When successful, they create a win for everyone: better working conditions and higher productivity and profits.
United's effort, if it succeeds, would be a powerful positive model for other troubled companies. But cheering from the sidelines won't help; United's employees must make it happen. The market itself will cast the decisive judgment.