Negotiation Case Study
The purpose of this problem is to familiarize students with the negotiation of a labor contract. The problem is strictly a hypothetical one and does not pertain to any actually management or union. It is designed to test in a practical way the student’s understanding of the issues of collective bargaining studied during the semester and the strategy of the bargaining process. The following constitutes the case on which demands will be based and which provides the framework for the negotiations. Read it very carefully to size up the situation. Base your demands only on the facts given here.
Representatives of the Auto Products Corporation of Indianapolis, Indiana, and Local 5000, United Metal Workers of America, are in the process of negotiating their collective bargaining contract. The negotiation covers the Indianapolis plant.* Auto Products also owns a plant in Little Rock, Arkansas, but the southern plant is not organized and is not a part of the current negotiations. The current contract, which covers only the Indianapolis plant, was negotiated for a 3-year period. The time of the negotiation is the present, and, accordingly, the parties are conditioned by current economic trends, patterns of collective bargaining, and labor relations law.
The Indianapolis plant has been in business for 60 years and has steadily expanded. At present, 1,409 production and maintenance employees are in the bargaining unit of the plan. The financial structure of the firm has been relatively good. Here are some financial data from the Indianapolis plant for the fiscal year preceding these negotiations: Net Sales $200,825,900
Material Costs 79,250,000
Direct Labor Costs (includes fringe benefits, payroll taxes, and reflects layoffs in previous fiscal year) 72,635,000
Other Variable Costs 13,265,000
Fixed Costs 5,500,000
Total Expenses 170,650,000
Income Before Taxes 30,175,000
Net Income After Taxes (Federal, State, County, Municipal) 14,200,000 In the past, the practice has been to distribute about 65 percent of net profits in dividends and to hold 35 percent as retained earnings. Last year the company borrowed $6.3 million from Hoosier National Bank. The rate of interest on the loan was 6.9 percent. The proceeds of the loans were used to expand the Little Rock plant. The loan is scheduled for liquidation in 10 years. The company manufactures a variety of auto accessories. These include auto heaters, oil pumps, fan belts, rear-view mirrors, and piston rings, and in the last year the company has also started production of auto air conditioners. About 65 percent of its sales are to the basic auto companies (General Motors, Ford, Toyota and Honda), 25 percent to auto-repair facilities, and the rest to government agencies. The plant operates on a two-shift basis. A $.25 per hour premium is paid to employees who work the second shift.
The employees of the company were unionized in 1949. In August of that year, the union was victorious in an NLRB election. As a result of the election, certification was awarded, on August 17, 1949, to Local 5000, since which time Local 5000 represented the production and maintenance workers of the company. The first collective bargaining agreement between the company and Local 5000 was signed on November 14, 1949.
Only one contract strike has taken place since the union came into the picture. It occurred in 1959; the issues were the union’s demands for a union shop, increased wages, and six paid holidays. The strike lasted 6 weeks. When it terminated, the union had obtained for its members a $.04 hourly wage increase (the union had demanded $.07) retroactive to the day of the strike, and four paid holidays. The union failed in its attempt to obtain any arrangement requiring membership in the union as a condition of employment. Also, the current contract does not include a check off. At the time of these negotiations, all except 100 workers in the bargaining unit are in the union....
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