MGM’s Dubai deal gave final push to contract talks

Michael J. Mishak

Sunday, Aug. 26, 2007 | 1:02 a.m.

After a bitter and very public war of words, followed by two months of radio silence, the Culinary Union and MGM Mirage came together Wednesday to reach a tentative deal on a new five-year contract affecting more than 21,000 casino and hotel workers.

The agreement, ratified overwhelmingly by workers Friday, meets most if not all of the union's demands. The company, despite apparent concessions, joined the Culinary in describing the settlement in glowing terms: Everyone wins.

If so, they won only after the two sides peered into the abyss of: Everyone loses.

The agreement came only after a difficult standoff, one that had become personal on both sides. The tough bargaining was being watched by presidential candidates and by unions across the country. MGM Mirage executives felt personally insulted.

Announcement of the new agreement created the public perception of two best friends suddenly coming to their senses to quash a personal feud. But the reality is more complex, with a variety of circumstances - and one enormous Arab wildcard - combining to set the stage for a settlement.

Spokesmen for the two sides declined to explain how they closed the breach, but details were provided to the Sun by four people familiar with the bargaining with the understanding that they would not be identified.

Some background:

Negotiations began in March, and both sides expressed a desire to settle early. But as the months dragged on, the talks went into a nosedive, with the union repeatedly emerging from the bargaining room lamenting the lack of progress.

Soon, with the backdrop of visits from the front-running Democratic presidential candidates, Culinary Secretary-Treasurer D. Taylor, the union's lead negotiator, said the looming standoff symbolized "everything that is right and wrong in this country."

MGM Mirage, accustomed to dealing with Taylor's predecessor, openly aired its frustrations with the union leader's steely style.

After a late-June bargaining session, the company released an internal memo, originally drafted for management, focusing on what it referred to as the union's flat refusal on six occasions to answer questions about the company's economic proposal.

MGM Mirage's queries, it said, were refused or deflected with no explanation.

"Among our MGM Mirage negotiating team we have literally decades of experience in negotiating collective bargaining agreements," wrote Cynthia Kiser Murphey, vice president of human resources for MGM Mirage. "None of us have experienced anything like this."

For its part, the union, having reached a settlement with Harrah's Entertainment a month earlier, turned its attention elsewhere, opening talks with other Strip operators , hoping that settlements with other companies would further pressure MGM Mirage.

The union then announced last month it was mobilizing members for possible walkouts. Tens of thousands of union members, labor leaders said, would gather on Sept. 12 at Cashman Field to vote on whether to authorize strikes at various properties if bargainers couldn't reach new agreements.

All three Democratic front-runners promised to walk picket lines.

The spectacle of a walkout joined by Sens. Barack Obama and Hillary Clinton and former Sen. John Edwards would be international news - and unquestionably would hurt Las Vegas tourism.

According to people interviewed by the Sun, MGM Mirage executives had expected a fair degree of political theater, especially in a presidential election year. But they felt the union had gone too far.

MGM Mirage executives weren't alone in their growing ire. Other casino operators, including some new to the Las Vegas market, were taking notice.

So in the early weeks of summer, MGM Mirage sidestepped normal channels to send the Culinary a private message:

This has gone too far. The acrimony threatens not only these talks but also your relationships with casinos and hotels across Las Vegas. Do we really want to permanently alter our famously friendly relationship - one that has allowed us both to prosper?

Soon, like lovers after a breakup, the two began a quiet discussion. Labor leaders met privately with senior executives. No longer was Taylor on one side of a ballroom, backed by an audience of 500 union members, looking across at a table full of MGM representatives.

That private meeting led to another, then another. The two sides began to move on their differences.

As they did, another part of MGM Mirage's immense operation was humming with excitement. The company was putting together a $5 billion deal with Dubai World, in which the Persian Gulf holding company would acquire a 9.5 percent stake in the gaming giant and assume 50 percent ownership of CityCenter, MGM Mirage's $7 billion showcase development being built on the Strip.

The talks and the deal proceeded on separate tracks until last week. On Wednesday, MGM Mirage Chief Executive Terry Lanni announced the deal, calling it "a transforming event" for the company and Las Vegas.

Company spokesman Alan Feldman said the deal, which includes an immediate infusion of $2.7 billion, would wipe from the books MGM Mirage's debt for the CityCenter project. The partnership opens doors for MGM Mirage to an international pool of wealthy potential buyers at a time when the domestic housing and condo market is weak. It also gives the gaming company access to the United Arab Emirates, which includes Dubai.

And it would do one more thing. It would give a final shove to the contract talks.

As Feldman said in an interview: "Dubai played a role in that announcing something this momentous for the company and the community, you don't want the specter of labor unrest surrounding it."

The message inside MGM Mirage became: Get it done.

That same day official bargaining resumed. The two sides met for 10 hours on Wednesday and by sundown, the talks were done, ending, fittingly for Las Vegas, with a standing ovation.

The new contract maintains existing health care and pension benefits, establishes a career ladder for employees and includes job security provisions that protect workers in the event a property is sold or redeveloped.

The deal also provides for company contributions to an IRS defense fund and a housing trust to help union members purchase homes.

Both sides had been dug in largely on pay and the rules that govern organizing at new properties - at CityCenter in particular. In those two cases there appears to have been a tradeoff.

On wages, the union won a series of fixed pay raises over the term of the contract. The company had been seeking a deal similar to the one the union signed two years ago with Steve Wynn at Wynn Las Vegas. That 10-year contract links pay raises to the consumer price index.

In exchange for annual raises, the union seems to have made a concession on organizing rights. The Culinary had been seeking so-called "card check neutrality" at all new MGM Mirage developments, including joint ventures.

Card check organizing means an employee can express a desire to form a bargaining unit merely by signing a card, rather than voting in an election. Neutrality means the company agrees not to interfere with the organizing campaign and recognizes the union once a majority of workers sign cards.

The union's demand, at least in the short term, was a direct reference to CityCenter, which includes two non-gaming boutique hotels managed by outside operators and comprising about 800 jobs.

MGM Mirage, while not contesting the union's right to organize about 6,000 workers at the development's centerpiece hotel, opposed card check-neutrality at the two boutique hotels. The company was wary of binding its future partners, especially after announcing a joint venture in June with Kerz-ner International Holdings to develop a multibillion resort on 40 acres at the north end of the Strip, across from the Sahara.

The compromise: the two boutique hotels can operate for three years without a union contract. After that, a neutrality agreement will take effect, and the Culinary can begin a card check organizing campaign.

The union put a positive spin on what appeared to be its only major concession. In a brief interview Friday, the Culinary's Taylor downplayed the card check provision.

"We're OK with that, because (card check) will get done," Taylor said. "We understand new companies need some time to understand the Las Vegas market. Operating in Vegas is a little bit different."

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