A year ago, labor leaders were relishing the prospect of a major bid to organize their toughest adversary, Wal-Mart.

More than any other corporation, Wal-Mart epitomized all the difficulties facing organized labor in a global marketplace. The company kept wages low and unions out, while applying relentless pressure on a huge network of suppliers to lower their own wage costs, and, in many cases, to ship jobs and production overseas. The fight itself could revive the stagnant movement, and a victory would convert the image of labor from loser to winner, leaders believed.

"Wal-Mart provides a chilling example of the damage that low-wage, non-union corporations can wreak, and their business model is going to set the standards for our children unless we do something now," Andrew L. Stern, president of the Service Employees International Union (SEIU), wrote in 2004. "Wal-Mart is the sewer pipe through which good jobs are being flushed."

But a major rift in the AFL-CIO that produced two warring camps in late July has almost certainly derailed that mission and threatened other important labor initiatives. And on Labor Day, union activists, corporate leaders and officials of both political parties are watching closely to determine whether the nation's largest labor federation will emerge from the split stronger and energized, or divided and weakened.

For the past 50 years, since the AFL-CIO was formed in 1955, the percentage of the workforce represented by unions has steadily declined from more than 35 percent to 12.5 percent last year, including only 7.9 percent of the private-sector workforce.

"We have seen that the unions are very fragmented now," said Wal-Mart spokeswoman Christi Gallagher. "We just don't feel like [labor's threatened campaign] . . . is anything we need to be concerned about."

Three of the largest unions in the country, the SEIU, the International Brotherhood of Teamsters and the United Food and Commercial Workers (UFCW), have left the AFL-CIO to form a competing organization, the Change to Win Coalition. The battle pits John J. Sweeney, 71, the president of the AFL-CIO, against Stern, his one-time protege.

AFL-CIO officials say the planned multimillion dollar Wal-Mart campaign is almost certain to be scuttled because the major beneficiary would be one of the defecting unions, the UFCW. Top officials had tentatively agreed to collectively set aside $25 million to $50 million a year to create a special Wal-Mart organizing fund.

"It's a major question whether affiliates who stayed in the House of Labor will want to pursue a huge investment in a campaign for a union that is no longer in the House of Labor," said Stewart Acuff, director of organizing for the AFL-CIO.

The split has other consequences. Without the AFL-CIO to act as referee in fights between competing unions, there is a threat that the opposing camps will raid each other's memberships, forcing money and resources to be invested in fights over organized workers instead of organizing the vast majority who are not in unions.

The defection of the three major unions has already intensified a bitter organizing fight over California home health care workers that pits the SEIU against the American Federation of State, County and Municipal Employees. The AFSCME has accused the SEIU of conducting a wholesale raid on workers the two unions had agreed would be organized by the AFSCME, while the SEIU contends that the AFSCME local was not living up to its obligations to win better wages and fringe benefits.

Acuff was outspoken in his criticism of the activities of Stern's SEIU in California.

"This could well consume the energy and efforts of 200 organizers," he said. "It is unconscionable, particularly given President Stern's promise not to engage in raiding. The fact that in 2005, with labor under corporate assault, under government assault, that a union would have to deal with an unconscionable action like this is hard to fathom."

The Teamsters charge that the AFL-CIO is conducting an egregious attack on its membership. Ronald E. Ault, president of the AFL-CIO's Metal Trades Department, is pressing to effectively shift members from the Teamsters and SEIU to other unions that have remained in the AFL-CIO.

"The vindictive behavior of the AFL-CIO leadership is outrageous," said Teamster spokeswoman Leigh Strope. "Workers are being told that they cannot work if they are Teamsters."

Stern contends that the level of intra-union conflict is relatively low key since the split, and he remains very optimistic. "This is a Labor Day of hope," he said. With the first convention of the Change to Win Coalition scheduled to start Sept. 27 in St. Louis, he said: "We are at a moment of hope and excitement."

Sweeney, who fought to prevent the split, was far less sanguine. The labor chief contends that employers have already become emboldened by the split, and more willing to challenge union organizing drives and to reject union demands at the bargaining table.

The fracturing of labor "has led to the popping of champagne corks at the White House, at Wal-Mart corporate headquarters and on Wall Street," Sweeney said in a speech honoring Labor Day.

"The single best good jobs program in this country is a union card," Sweeney said. "Over 90 percent of union workers in the private sector have medical insurance through their jobs. Three-quarters of union workers in the private sector have a defined benefit retirement plan through their jobs versus only 16 percent of non-union workers."

The decision of the SEIU, the Teamsters and the UFCW to leave the AFL-CIO has provoked a debate among union activists, corporate strategists, academics and others over whether the move will be damaging or will shake up an institution desperately in need of new policies and new initiative.

Richard B. Freeman, an economist at Harvard and the National Bureau of Economic Research, says that competition is very likely to benefit labor, which is in decline in almost all industrialized countries. If nothing else, he said, it will force leaders to consider new strategies to replace approaches that have failed to pull union membership out of a long nosedive.

A number of business and conservative leaders say, in contrast, that they will be the winners and labor the losers. "This will have a short-term effect on organized labor to advance its agenda on Capitol Hill, and help us," Randel Johnson, vice president of labor, immigration and employee benefits, at the U.S. Chamber of Commerce, told the Bureau of National Affairs. "We're obviously pretty happy that the people we fight are at each other's throats," Ryan Ellis, who works on labor issues at Americans for Tax Reform, told BNA.