It’s difficult to find much optimism in the temporary ceasefire between Carl Icahn and the union representing the employees of Trump Taj Mahal. The troubled Atlantic City casino will remain open for the time being, perhaps up to a year, but there will be no winners in this struggle, regardless of who loses.
By ponying up $20 million to keep the facility open indefinitely, Mr. Icahn avoided the public relations disaster that would have accompanied shutting down the Taj the week before Christmas, a lump of coal in the stockings of the 3,000 workers who would have lost their jobs. Such a move would have surely earned the billionaire financier a “Grinch of the Year” title and would have provided ample fodder for opponents seeking to portray him, somewhat accurately, as a ruthless corporate raider bent on enriching himself at the expense of workers.
On the other side, the Local 54 Unite-HERE union representing Atlantic City casino workers has overplayed its hand by engaging in dangerous game of chicken, maintaining a hard-line negotiating position that would put the Taj out of business should it acquiesce to the union demands of fully restoring pension and health care benefits. But union president Bob McDevitt and his constituents have been forced into a corner and are fighting for their very existence. They have little to gain by backing off and will only go down swinging.
In this dispute, union members symbolically represent their fallen brethren, the 8,000 workers who were laid off after four Atlantic City casino closures in 2014, though they also have ample reason to be upset about getting shortchanged in the Taj Mahal bankruptcy proceedings.
They lash out against corporate greed among the casino owners, and it is not difficult to sympathize with their plight. They are victims of their employers’ failure to reinvest and offer competitive products in Atlantic City while neighboring states were aggressively grabbing market share.
The commonality among Atlantic City’s casinos, whether closed or just endangered, is that they had evolved into primarily bottom feeders, seeking little more than to attract the tour bus crowds. The union alleges this is the reason the properties are now failing – not because of out-of-control pension and health insurance costs – and has concluded that every casino owner in Atlantic City is bent on asset-stripping and milking enormous profits at the workers’ expense.
Workers point to the closure of the Showboat last summer as a textbook example. The casino was shut down even though it was still profitable, in an attempt by Caesars to rationalize supply and consolidate market share in the city. All of this occurred at the expense of loyal workers who had dedicated their lives to making the property thrive, employees assert.
This isn’t that different from your traditional labor versus capital conflict. And at the end of the day, Local 54 and Carl Icahn have turned into each other’s worst enemy, but it was not supposed to turn out that way.
Through his turnaround of the Tropicana, which was also on the verge of going under recently, Mr. Icahn emerged as a potential savior who possessed the magic formula for righting the ship. But he realized that by partnering with Trump Entertainment to redo the Taj Mahal property, he would be inheriting a quagmire.
A ruling this past fall by a bankruptcy judge terminating the union’s contract with the casino seemed to resolve the issue in Icahn’s favor, but the union filed an appeal that it has refused to withdraw despite the demands of Icahn and Trump Entertainment.
Indeed, this scuffle is a battle that neither party wants nor can win. Mr. Icahn’s attempt to rescue the casino has been thrown in his face and he has become a de facto Gordon Gecco of the casino business. He now understands that resurrecting a struggling Taj Mahal is a massive and nearly impossible venture given current conditions. Should the reinvestment plan go awry, the blame will likely fall on his shoulders. Even in the best case scenario, he inherits a struggling casino that is among the least appealing on the struggling Boardwalk -looking something like a poorly designed wedding cake, and well behind the local competition in terms of reinvestment and rebranding.
For Local 54, any reputation they might have had of being a reasonable negotiating party has evaporated. Future employers will remember how the union didn’t want to settle for anything less than conditions that would put the Taj Mahal out of business.
It is difficult to imagine a scenario in which this ends well. Perhaps the best way to resolve it is to drag out the process as long as possible to minimize any further shocks to Atlantic City’s delicate labor market and allow workers the chance to look for other jobs, to the extent they are available.
But the real lesson here might be how the alliance between casinos and unions is, at best, much more fragile than previously understood and, at worst, a time bomb waiting to detonate.
Casino owners have heavily relied on the political support of local trade unions in their efforts to expand across the country. In return for votes and advocacy, casinos offer jobs that are typically unionized, meaning a less-flexible labor force of workers who are well compensated and difficult to shed.
So these alliances are politically savvy moves for getting casinos approved and built, but the piper must be paid if the facilities underperform and face being crushed under the weight of labor agreements that can’t be restructured. We are witnessing the flip side of the “gaming creates jobs” argument: when a market becomes oversaturated, which is true in many places, and casinos begin to stumble, the result is these ugly disputes, which hardly put the industry’s best foot forward.
