June 06, 2008

General Motors Bad-Faith Bargaining Not the Way to Go

It was announced today that GM is sticking by its story that the market changed so drastically from two weeks ago that they have to continue with the violation of their labour agreement with CAW. It likely goes without saying that CAW doesn't believe their woeful tale. And they shouldn't because who would?

As I wrote yesterday that market trends don't just appear over night and restructuring plans of this magnitude take longer than mere days or a couple of weeks to put in order. General Motors would know all along what their sales are like and would be able to read the market trends long before they occur in any drastic measure. The past has shown that with spikes in gas prices sales of large vehicles will slump somewhat. The success of companies such Toyota and Honda with their compact and low-fuel consumption over the last several years, at least, would also be an indicator. GM should, have been preparing for slowing sales of trucks and SUVs for sometime. It's likely they have been.

This begs the question, why would they have bargained in bad faith with CAW?

One possibility is that they wanted to wrangle many concessions out of its employees. However, with there being precedence set by the Ford contract, it's likely GM couldn't get everything they wanted. They are now going to use the threat of closure to get even more concessions out of their employees before willing to change their plans. Think of this as a back door method of locking-out their employees. GM, just signing a new contract can't legally lockout its employees so instead will threaten a permanent closure to bring CAW back to the bargaining table to renegotiate the current contract.

Another possibility is that GM wanted to see what they could get out of the current contract so they could tally what the possible penalties would be when they made the decision to violate their contract. From GM's point of view, the financial costs of buyouts and severances, and the penalties that they are possibly going to incur for breaking the terms of their government assistance and labour agreement are worth it in the long run. In other words, they are willing to foot the bill on massive payouts right now in hopes of saving money later.

I understand it when a company is looking at their long term viability. That is likely what GM is doing here. However, they've gone about it the wrong way. It's one thing to present all the facts in negotiations and work together with your counterpart to find workable and longterm solutions, together. Ford was able to do it and they set precedence doing it. But to hide your facts and plans during the negotiations comes with much more problems. The public relations fallout may be enough to knock sales down even further and drive customers to your competitors. The financial costs may be much higher than you expect, especially if it is deemed you were highly dishonest. And if you're losing billions already losing more money, in this manner, doesn't seem to be in your interest. Let's not forget that the GM brass have already made errors in judgment, whether it came from the supposed misreading of the market, the closing of your most cost-effective and highest quality rated plant, and so on. Pulling this stunt is not going to reflect well on the company and is likely a huge miscalculation on the part of GM's brass.

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