- UAW opposes GM's plan to import vehicles
- UAW opposes GM's proposed plans to shut down 16 U.S. factories
Tag archive: contract-negotiations
Negotiations in the Spotlight: GM - UAW
If you have ever thought that there is little public interest in business negotiations, then you have not been following the recent news regarding negotiations between troubled automakers Chrysler and General Motors (GM) and their unions. These high-stakes negotiations have received lots of publicity precisely because they are determining the future of the auto industry in the United States.
We know how Chrysler's negotiations turned out, and the car maker is headed for a partnership with Fiat.
This week, GM announced that it is terminating franchising agreements with hundreds of GM dealers nationwide. But that is only part of the GM restructuring push. GM is also negotiating with the United Auto Workers (UAW). The automaker faces a June 1 deadline to complete its restructuring, or it will face bankruptcy.
The issues that are creating most heat between GM and the UAW are:
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The Sticking Point
What happens when you can’t get the other party to budge? You have reached the dreaded sticking point. In effect, sticking points are "no." Negotiators don’t like reaching "no" because it stops movement, and can derail the negotiation. Sticking points can suck the energy out of a negotiation and prolong the discussions because neither party is willing to concede on that issue.
Sticking points revolve around many issues: compensation, contract length, benefits, organizational structure, and so on. For instance, during the recent Boston Globe negotiations, a sticking point for the unions was retaining lifetime job guarantees.
Another current example involves Chrysler. Sergio Marchionne, CEO of Fiat, will now run Chrysler. He wants to combine Fiat, Chrysler and GM’s European operations. According to this Detroit News article:
(http://www.detnews.com/article/20090507/AUTO01/905070438/1409/Marchionne-to-head-Chrysler)
"Sources familiar with the negotiations, say Marchionne also wants to include GM's Latin American operations in the mix.
That is a sticking point in the negotiations -- along with the size of the stake that GM would get in the new company grouping Fiat's auto business, its prospective interest in Chrysler and the GM assets. Marchionne is proposing that GM should have around 10 percent, while GM is bound to want more, the source said."
How do you move past a sticking point?
Dr. Karrass calls these points of no agreement "sticky issues." He recommends that when you reach a sticky issue you should shift to another issue. Shifting allows the momentum to continue in the negotiation. With the momentum going, and having agreement on other issues, you will have more reasons to settle a negotiation.
How have you resolved a particular sticking point? Share your "war" stories in the comments.
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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?
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- 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.
- 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.
- 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.
No wonder the peanuts are $42....
I received an email:
Have you been following the Dodgers' negotiation with Manny Ramirez and his agent, the infamous Scott Boras? The Dodgers presented an offer of a 2 year contract, first year for $25M, second for $20M with a player option to opt out of the contract after the first year. Some of the money is deferred, so there is a "funny money" component here.
The deal was rejected by Boras and Ramirez, who then presented a counteroffer. Dodgers owner Frank McCourt would not respond to this counter, and then rescinded his own offer, saying "Now we start from scratch."
If I'm following correctly I sense at least three techniques from the Effective Negotiating seminar. Evidently McCourt's position was a "take it or leave it" (although I don't know if he expressed this in the negotiations, or just decided it after the fact). He then withdrew from the negotiating process entirely (forced deadlock), and for good measure added a kind of "Escalation" when he threatened to start over from scratch.
I've thought about doing this sort of grand gesture negotiating in some of my own deals, but usually decided I was just being emotional and not very business-like. However, in McCourt's favor, Boras and Ramirez have come back with two slightly more attractive counter-positions in the interim. My question is this: are there rules or guidelines for when it's smart and productive to withdraw an offer and step away from the negotiation?
Thank you,
Baffled and Intrigued
B and I,
Thanks for your query.
Clearly, you took the Karrass negotiating seminar seriously.
First let's catch everybody up with the players in this little drama. If you don't keep up with sports or sports negotiations, and you would like an entertaining and enlightening look at Mr. Boras, here it is.
In terms of negotiating, Mr. Boras seems to suffer from his own history. There are teams that historically won't even deal with him.
This relates to observations I've made recently about being too tough in negotiations. After a while, your reputation may not only intimidate your counterparts - they may just not show up. You may be the 800 pound gorilla in the room, but, given the choice, who wants to be in a room with an 800 pound gorilla?
To your question: I like to think that there are No hard-and-fast rules in Negotiation. Karrass would say, "No cookie-cutter approach."
Given that, when would one withdraw temporarily from a negotiation?
There may be several reasons, but among the biggest are:
1. When you learn new information and need time to regroup. In this case, maybe something more was revealed to Mr. McCourt by the Boras side that made them feel the landscape had changed significantly. This could be an advantageous or disadvantageous change.
2. To demonstrate the firmness of your limits.
This may be done for Mr. Boras' benefit or it may be done as a demonstration to the rest of Dodger's ownership, that McCourt is serious. Understanding the very public nature of the negotiations, Mr. McCourt may be sending a message to other players, current and future, regarding the limits within which the Dodger's will deal.
3. And, of course, there's always the good possibility of EGO being involved.
Remember, there is a substantial difference in a salaried worker doing a production deal for a company that needs to stay alive, and this deal wherein undoubtedly Mr. McCourt cares for the Dodgers and Mr. Boras has some level of allegiance to Mr. Ramirez, but each may see his own needs in great relief relative to the over-all picture....
More on agency in negotiation as we move forward.
Until next time...think about it.
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Re-Negotiate Your Agreements
Re-Negotiate Now
Times change. What once made good business sense, now no longer works. Effective negotiators are now reviewing past agreements to determine which need to be re-negotiated to bring them back into balance.
In the Effective Negotiating seminar we discuss what we learn from various cultures around the world. Re-negotiating is a central premise in the Asian culture – China in particular. When a Chinese organization makes an agreement, it usually is an agreement ‘for now.’ The agreement simply paints a picture of a fixed point in time--today. As things change, the Chinese expect the agreement to change, regardless of what is written on the paper called ‘the contract.’
Think about it. This makes a lot of sense. It is a very practical approach you should take into your negotiations.
Over time, facts and knowledge change. You now know more than you did when you made the agreement. Use this knowledge now to make it a better agreement.
Negotiating pressures, power and expectations also change over time. How does this impact your agreements? What needs to be changed now to bring the agreements back into equilibrium?
It is a wise negotiator that builds contingence plans into all of their agreements.
Relationships change. Hopefully you now know the other party much better than you did when you made the initial agreement. How does this impact your ability to re-negotiate a better agreement for both sides?
Today most of us face a tough economy. Costs have changed; now is the time to re-negotiate prices and terms. The original ‘work sharing’ formula for your teaming agreement is not actually happening – it is time to re-negotiate. Changes and modifications need to be made to existing agreements to enhance value for both parties.
It is important you survive and continue to prosper. Your success depends on your skill and ability to negotiate to keep existing agreements in place, and when necessary, to re-negotiate profitable alternatives.
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Negotiating Around An Impasse
You did everything right, yet you find yourself at an impasse with the other party. What do you do?
Too many negotiations break down for the wrong reasons. Impasses are not always caused by world shattering issues or great matters of economics. Many breakdowns are the result of simple things like personality differences, fear of loss-of-face, troubles within the organizations, a poor working relationship with the other party, or one party's sheer inability to make a decision.
Any consideration of how to break an impasse must take into account the human factor. It may not be what you do, but how you do it that becomes the critical factor.
Here are several moves useful in averting or breaking an impasse:
1. If the impasse involves money -- offer to change the shape of the money. A larger deposit, a shorter pay period, or a different payment stream works wonders -- even when the total amount of money involved is the same.
2. Change a team member or the team leader.
3. Eliminate some of the uncertainty. This can be cone by postponing some difficult parts of the agreement for renegotiation at a later time when you both have more information.
4. Change the scope of risk sharing. A willingness to share unknown losses or gains may restore a lagging discussion.
5. Change the time scale of performance. Maybe it's OK to complete 60% over four months rather than three months. It might be easier to start slower and still complete the job within the desired timeframe.
6. Assure satisfaction by recommending grievance procedures or guarantees.
7. Move from a competitive posture to a cooperative problem-solving mode. Get engineers involved with engineers, operations people with operations people, and bosses with bosses.
8. Change the type of contract: fixed price, indexed or scaled price, time and materials.
9. Change the base for calculating percentages: a small percentage of a larger base or a larger percentage of a smaller, but more predictable base, may bet things back on track.
10. Create a list of options or alternatives that need to be discussed. Or change the order of discussion.
11. Suggest changes in the specifications or terms.
Impasse breakers work because they re-engage the other party in discussions with his or her organization and team members. These icebreakers help create a climate where new alternatives can be developed and refined. Surprisingly, sometimes the introduction of new alternatives has the effect of making old propositions look better than ever.
Try to pre-plan a face-saving way to reopen discussion should an impasse occur. If you set the stage before the impasse sets in, you can better handle the problem.
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Negotiating: Breaking An Impasse
You did everything right, yet you find yourself at an impasse with the other party.
What do you do now??
Too many negotiations break down for the wrong reasons. Impasses are not always caused by world-shattering issues or great matters of economics. Many breakdowns are the result of simple things like personality differences, fear of loss-of-face, troubles within the organizations, a poor working relationship with the boss, or the sheer inability to make a decision.
Any consideration of how to break an impasse must take into account the human factor. It may not be what you do, but how you do it that becomes the critical factor. Here's several moves that may be useful in averting or breaking an impasse:
1. If the impasse involves money – offer to change the shape of the money. A larger deposit, a shorter pay period, or a different payment stream works wonders – even when the total amount of money involved is the same.
2. Change a team member or the team leader.
3. Eliminate some of the uncertainty. This can be done by postponing some difficult parts of the agreement for renegotiation at a later time when you have more information.
4. Change the scope of risk sharing. A willingness to share unknown losses or gains may restore a lagging discussion.
5. Change the time scale of performance. Maybe it’s OK to complete 60% over 4 months rather than 3 months. It might be easier to start slower and still complete the job within the desired timeframe.
6. Assure satisfaction by recommending grievance procedures or guarantees.
7. Move from a competitive mode to a cooperative problem-solving mode. Get engineers involved with engineers, operations people with operations people, and bosses with bosses.
8. Change the type of contract: fixed price, indexed or scaled price, time and materials, percentage of savings, percentage of increased sales, and percentage of profit created.
9. Change the base for calculating percentages: a smaller percentage of a larger base or a larger percentage of a smaller but more predictable base may get things back on track.
10. Create a list of options or alternatives that need to be discussed. Or change the order of discussion.
11. Suggest changes in the specifications or terms.
Impasse breakers work because they re-engage the other party in discussions with his or her organization and team members. These icebreakers help create a climate in which new alternatives can be developed. Surprisingly, sometimes the introduction of new alternatives has the effect of making old propositions look better than ever.
Try to pre-plan a face-saving way to reopen discussions should an impasse occurs. If you set the stage before the impasse sets in, you are in a better position to handle the problem.
Read more »