From The Associated Press

PEORIA - Caterpillar Inc. workers have rejected a proposed six-year labor agreement that the heavy equipment company has called its final offer, the United Auto Workers announced Sunday night.

Caterpillar and the union said employees should report to work today, even though an extension of their contract expired Sunday night.

The union's bargaining team will meet "as soon as practical to assess the situation and plan our next steps," chief UAW negotiator Cal Rapson said in a prepared statement.

Union officials declined further comment and did not release totals of the weekend balloting by seven locals in Illinois, Colorado, Pennsylvania and Tennessee.

Caterpillar's chief negotiator, Chris Glynn, said he was disappointed workers rejected the deal.

"We will take time to assess the situation, and our hope is that employees will also use this time to reflect on our proposal and weigh its merits against other opportunities that exist within our industry and market. We believe, with time, they will find it very competitive," Glynn said.

About 8,000 UAW members had their first look at the proposal over the weekend because of an agreement that kept contract details behind closed doors since talks began in December.

Workers from the union's largest local generally blasted the offer after casting ballots Sunday in Peoria, where the world's No. 1 maker of earth-moving equipment is headquartered.

"They're making billions and billions and they can't even give us a raise," said Larry Johnson, a 30-year Caterpillar employee.

who works at the company's Morton plant.

Caterpillar reported record first-quarter profits of $412 million last week and raised its full-year outlook for earnings and revenue. The company said the brighter economic forecast assumed timely approval of a new labor agreement.

Workers said Sunday they were unhappy their free health care insurance would be replaced by $21 monthly premiums for single coverage and $66 for a family. Retirees would pay nearly $60 a month for single coverage and about $120 a month for a family. Retirees also have free medical coverage now, but that will end this year regardless of a contract because a union fund that has paid the premiums will be depleted.

The proposal also would continue a two-tiered wage system that is part of the current contract, reached after a bitter, 6 1/2-year stalemate in the 1990s that included two strikes.

Veteran employees, who make more than $20 an hour, would receive small cost-of-living increases under the company's offer, according to an 18-page summary of the proposal the union provided to members.

Employees hired under the proposed agreement would start at $10 to $15.75 an hour, and those wages would increase to $11.50 and $17.85 per hour, respectively, after three years.

All employees would receive a $3,000 bonus this year if the offer is ratified. Veteran workers would also receive annual lump sum payments totaling 14 percent of their yearly pay over the last five years of the contract. New hires would get bonuses totaling 5 percent, along with a 2 percent wage increase in the fifth year of the contract.

Caterpillar's offer also provides job security for veteran workers, and guarantees that no U.S. plants will close during the length of the contract. The guarantee excludes a parts facility in Memphis that union officials said employs about 10 workers, though no plans have been announced to shutter the plant.

UAW members have authorized a strike if talks break down, but Peoria-area workers said Sunday they hope Caterpillar will return to the bargaining table.

"For a working man to have a strike is not beneficial to them. You end up losing money in the long run and it's hard in the short term because a lot of people work paycheck to paycheck," said Phillip Hickam, a retiree who worked 30 years at Caterpillar's Mossville plant.