1. Labor Negotiations

2. Contract expires this year.Contract expires this year. Labor will produce a set of demands.Labor will produce a set of demands. –10% above current contract. Management will establish negotiation range based on current contract.Management will establish negotiation range based on current contract. –Current Wages 80% <x<150% –Benefits, Profit Sharing and Annual Raises 0% <x<150%

3. Labor Position Labor demands 10% over current contract.Labor demands 10% over current contract. $11.00 $10.00 Current Contract

4. Management Position Enter Starting position with one bids (wages, benefits, profit sharing, and annual wage increase) to Labor:Enter Starting position with one bids (wages, benefits, profit sharing, and annual wage increase) to Labor: –First bid has to be within the parameters (wages 80% and 150%, other between 0% and 150%) –Negotiation ceiling is automatically 10% higher than starting position. $11.00 Firm 1 Firm 2 Firm 3 $8.00$8.00$11.50$11.50$12.00$12.00 LaborLabor $11.00$11.00 First Bid $10.00 $8.00 $12.00 $11.50

5. Negotiation Labor looks at only the first bid made by management and selects the best bid over 10% of current contract this becomes labors new demand.Labor looks at only the first bid made by management and selects the best bid over 10% of current contract this becomes labors new demand. Firm 1 Firm 2 Firm 3 $8.00$8.00$11.50$11.50$12.00$12.00 LaborLabor $12.00$12.00 First Bid $10.00 $8.00 $12.00$12.00 $11.50 Labor Settle Firm 3

6. Negotiation Labor looks at the remaining negotiating ceilings by the firms not offering the best first bid.Labor looks at the remaining negotiating ceilings by the firms not offering the best first bid. $8.00$8.00$11.50$11.50$12.00$12.00 $8.80$8.80$12.50$12.50 First Bid Second Bid $10.00 $8.00 $12.00 $11.50 Labor $8.80 $12.50 Firm 1 Firm 2 LaborLabor

7. Negotiation If the negotiating ceiling is higher than labors demand, labor will settle for half the difference between first bid and labors demand. No strike will occur.If the negotiating ceiling is higher than labors demand, labor will settle for half the difference between first bid and labors demand. No strike will occur. $8.00$8.00$11.50$11.50$12.00$12.00 $8.80$8.80$12.50$12.50 First Bid Second Bid SettleSettle $11.75$11.75 $10.00 $8.00 $12.00 $11.50 Labor Settle Firm 2 $12.50 Firm 1 Firm 2 LaborLabor $8.80

8. Negotiation If the negotiating ceiling is lower than the labors demand. Settlement is half way between labors demand and the negotiating ceiling, resulting in a strike.If the negotiating ceiling is lower than the labors demand. Settlement is half way between labors demand and the negotiating ceiling, resulting in a strike. STRIKE $10.00 $8.00 $12.00 Labor Settle Firm 1 $8.00$8.00$12.00$12.00 $8.80$8.80 First Bid Second Bid SettleSettle $10.40$10.40 Firm 1 LaborLabor $8.80

9. Length of Strike For every $1 difference in wages, 1 week strike.For every $1 difference in wages, 1 week strike. For every $300 difference in benefits, 1 week strike.For every $300 difference in benefits, 1 week strike. Each % difference in profit sharing and annual wage increase, 1 week strike.Each % difference in profit sharing and annual wage increase, 1 week strike. Max length of strike 12 weeks.Max length of strike 12 weeks.

10. Strikes always occur at the end of the year. If a strike is 21 days long, workers would picket during the last three weeks in December. If you have inventory on hand during the strike, sales continue. R&D projects also continue.

11. Tactics Your company will need to determine which negotiation tactics best serves your purposes. Companies with low automation will want to control labor costs. They would offer the lowest acceptable wage, which is 80% of the current contract and eliminate all benefits. Companies with high automation might choose to be extremely generous with their workers, which will impose higher costs on their competitors (Remember, Labor looks at all offers and makes the highest offer part of their demand).