A Game of Chicken?

Turning a negotiation into a game of chicken?

Robert Gibbs, the White House press secretary, said today about the Chrysler negotiations that Chrysler’s creditors were playing a game of chicken with the government for a better deal.

As you have no doubt heard, Chrysler’s negotiations with its main bank creditors (JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs) and the US government broke down at the last minute, and no deal was struck before the April 30th deadline.

Chrysler is now expected to seek Chapter 11 bankruptcy protection. However, Fiat will still form an alliance with the US automaker, giving Fiat a majority stake.

Was the government-imposed deadline to blame? Did the creditors believe that the government was so anxious for a deal to be struck that they engaged in a game of chicken, seeing who would be the first to concede?

You are playing a game of chicken when you are given a chance to take the "final" offer or risk the consequences. In Dr. Karrass’ view, negotiations should not become a game of chicken because you should be able to keep talking.

In this case, the problem was there really was no more time to keep talking. With a firm deadline in place, Chrysler was against the wall. The creditors knew that Chrysler was in a bad position and yet they made a final offer that was not acceptable either to the government or to Chrysler. Given the situation, there was no time to continue talking to find a better deal.

Can (Should) You Negotiate OnLine?

It was inevitable that negotiations would migrate to the online world.

In a very insightful article (http://www.nytimes.com/2009/04/26/realestate/26cov.html),

the New York Times reports on the increasing use of email for real estate negotiations.

It is now common in New York for offers to come in via email to mobile devices, speeding up negotiations for real estate.

As the article points out, there are several advantages to using email in negotiations:

• It is a written record (something that Dr. Karrass recommends)
• Keeps all parties informed
• Gives parties time to digest information

But there are pitfalls to negotiating online. The main one is anonymity. For instance, some real estate agents are now sending low-ball offers via email, so they don’t have to see the reaction on the other side. And being able to see the other party’s reactions, and gauge emotions is important when negotiating. This type of "soft" information is very useful in helping you to assess the situation, and figure out where you stand vis-à-vis the other party

It is easy to have misunderstandings via email. You have to wait for a response instead of being able to clarify things quickly as you would in a face-to-face interchange. Also, email is notoriously bad at communicating tone. Any humor, sarcasm or even encouragement is lost in electronic communications.

If you are going to negotiate online, it is important that you know the other party well. As the article states: "One of the keys to a successful online negotiation is to make sure agents and clients have met to establish a relationship."

Perhaps it would be wiser to leave email negotiations for small transactions, and meet in person for important negotiations.

Have you conduction negotiations online? Did it work for you?

Update: Chrysler Reaches Agreement

Last Friday, we talked about whether a deadline would help Chrysler reach an agreement. Today, we have an answer.

It seems that on Sunday, Chrysler was able to resolve some issues with labor, reaching a concession agreement with the UAW. Here’s the story:

http://news.yahoo.com/s/ap/us_chrysler_labor.


Negotiations are still ongoing with Fiat and Chrysler’s debtors, but things are looking up for the automaker, which may be able to avoid bankruptcy after all.

As a Deadline to a negotiation approaches concessions and the magnitude of concessions often increase. If the Deadline is real -- as this one appears to be -- participants will often start making riskier decisions.

At a Deadline one negotiating option is to simply halt the talks and walk away. It appears that this option probably is not available to Chrysler or its unions.

Chrysler's Deadline Next Week?

Will a deadline help Chrysler negotiations?

Chrysler is the midst of a tough negotiation that pits the carmaker against its creditors, the Italian automaker Fiat, the United Auto Workers (UAW) and also has the U.S. Government playing a role. The government has imposed a deadline of April 30for a deal to be reached. This means that the carmaker has only a few days to reach an accord and avoid a Chapter 11 bankruptcy. At stake is $6 billion from the government, which would be in addition to the $4 billion in loans it already extended to Chrysler.

Deadlines always increase the pressure to close a deal. In some cases, negotiators don’t know if a deadline is real and whether the other party is just trying to force a deal. Dr. Karrass advises you to be skeptical of deadlines in negotiations. However, he cautions, there is also a risk in not believing in a deadline, especially if it turns out that the deadline is real. In this case, the government has imposed a very real deadline on Chrysler.

The Agence France Presse reported yesterday that the Chrysler negotiations have gone into high gear because of the impending deadline. http://www.google.com/hostednews/afp/article/ALeqM5h0aZkvaukxQboyJU6uRLR9WxMvfA

A deal that would avoid bankruptcy for Chrysler is a very complex restructuring of the company’s debt, involving four major US banks. Fiat would agree to invest cash, but the Italian company seems reluctant to do this.

Today’s New York Times is reporting http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&hp that the US Treasury will direct Chrysler to prepare a Chapter 11 filing. It would seem that the government does not think Chrysler can reach a deal before April 30th.

Will the deadline force all parties to reach a deal? Will Chrysler have to go into Chapter 11, and if so, will there still be a deal with Fiat?

Did IBM or SUN Really Want the Deal?

How much do you really want the deal?

In any business negotiation, knowledge is power. One thing you know that the other party does not know is how much you really want the deal or not. This knowledge is one of your most valuable assets, and you should hold it close to your chest.

This past Monday, a big deal went down in the tech world. Oracle www.oracle.com acquired Sun Microsystems www.sun.com after Sun’s negotiations with IBM www.ibm.com failed. See CNN article: http://money.cnn.com/2009/04/20/technology/sun_oracle_ibm/?postversion=2009042013)

Oracle paid $7.4 billion for Sun Microsystems, while IBM had offered $7 billion. Sun had negotiated with IBM for weeks, and IBM had been very interested in acquiring Sun’s Java platform.

Now, IBM has not issued any public statement but analysts have speculated that it did not really want the deal, and that it is not threatened by an Oracle-Sun merger. Furthermore, it seems Sun has a server division which is in trouble, and fixing that division may be a challenge for Oracle.

It is possible that IBM knew all along that Oracle would want Sun, and further, that Oracle would be put at a disadvantage because of the server business. And perhaps IBM knew throughout the negotiations that it didn’t want to acquire Sun. Nobody but IBM negotiators knows how much they wanted the deal or why exactly they chose to let this one go.

In this case, negotiation may have been a tactic for IBM to achieve business goals other than to acquire Sun Microsystems. Perhaps IBM wanted to learn more about Sun or wanted to see if Oracle would want Sun. We don’t know. But we can surmise that IBM did not really push for a deal.

Negotiating Your Viewpoint

Ideas are like possessions; people don't like to part with them.
An exchange of viewpoints can be a very tough negotiation.

Remember these nine important items when you are negotiating your viewpoint. You will find yourself more successful in assuring your viewpoint prevails.

1. Talk less, listen more. The other person wants to be heard. Encourage them to talk freely about their viewpoint. This will provide you insights into why they feel they way they do. Chances are the other person will reciprocate and be more attentive when you speak.

2. Don't interrupt. Interruptions make people angry and block communication.

3. Don't be belligerent. While it might be more difficult to be soft spoken than harsh, a soft-spoken approach encourages the same treatment from the other person. An argumentative negotiating attitude is rarely successful in changing another person's opinion.

4. Don't be in a rush to bring up your own points. As a rule it is best to hear the other person's full viewpoint before expressing your own. Ensure they are satisfied that they have stated their full case.

5. Restate the other person's viewpoint and objectives as soon as you understand them. People like to know they are being heard and understood. This is an inexpensive concession you can make. It forces you to listen better and helps you to frame your viewpoint in the other person's terms.

6. Identify the key discussion points you are interested in and focus on them. Cover one point at a time and avoid trying to overwhelm with arguments. Use evidence to support your viewpoint (e.g. knowledge, legitimacy, time and effort).

7. Don't digress. Try to keep the other person from digressing. It helps to agree on nonessential issues temporarily. Agree to postpone a seemingly difficult issue until later so you can focus on areas where you are more likely to gain agreement.

8. Be for a point of view -- not against one.

9. Instill satisfaction in the other party--satisfaction that you have heard and understand their viewpoint. This way if your viewpoint is the one that ultimately prevails, you will have strengthened your personal relationship with them. And set the stage for future discussions when your viewpoints again differ.

Can you negotiate with pirates?

Blackbeard may long be dead but piracy is alive and well (and on the upswing) in the seas off Somalia. And why not? Somalian pirates are able to take over unarmed ships and hold expensive cargo and crew hostage in return for ransom. Easy money for the pirates since most commercial ships carry hijacking/piracy insurance and are able to pay out high sums. Until last week, the pirates were winning. The shipping companies were forced to negotiate with the pirates in order to return their crew and vessels.

Last week, pirates attempted to hijack the Maersk Alabama, and were able to take its captain, Richard Phillips, hostage. The pirates demanded more than a million dollars in ransom money for his return. In Captain Phillips’ case, negotiations seemed to break down and finally, the Navy SEALS were deployed to save him. Why did this situation have to be resolved by force? Why did the negotiations fail?

1) No common ethical background
A common ethical background is essential in conducting negotiations. In a typical business negotiation, for instance one involving a sales contract, both parties share an understanding of contract law and moreover, have a shared sense of consequences if said law is broken. Pirates, on the other hand, are not known for their ethical behavior. By engaging in piracy and hijacking, pirates have already shown a disregard for laws and ethics, and prove that they have no fear of consequences.

2) No room for compromise
When pirates "negotiate" there is no room for compromise because it becomes a zero-sum game. Either money exchanges hands or someone gets killed. When there is no middle ground, no amount of negotiating skill will help.

3) Unequal footing
Negotiations often seek to find a mutually acceptable price for a transaction. How can you put a price on a life? How much is too much or too little? For the family of a hostage, there can be no price that is too high--a life is always more precious than money. And the pirates know this.