Negotiations: General Motors Strike of 1998


The year 1998 saw the employees of General Motors downing their tools in what they alleged as poor working conditions from the company. ‘General Motors’ is one of the best performing companies in the world and the strike caused a lot of losses to the company. The strike which took a total of 67 days occurred after the workers failed to agree on the new labour laws. The workers had actually presented their petitions to the management earlier on and an agreement for consideration promised to them. The workers had given the management a deadline to come up with a solution and when they failed, the strike was inevitable. The management did not take the issue seriously because they basically did not think the workers would go to such a level. The automaker and the United Auto Workers (UAW), called for a strike when there was a disagreement on the new national labour contract (Binder, 2000). This was the first strike that was called against General Motors and it indeed caught the company by surprise. This was also a moment that gave its competitors a chance to make more money as most activities of the company were paralysed. The UAW president who incited the workers to go on strike mentioned that he was ready to enter into negotiations to solve the problem without necessarily going on a strike. The strike arose basically because the company did not pay attention to the demands of its workers.

Company managements usually take it for granted when the workers submit to all their demands. It probably never comes to their mind that their workers would down their tools and demand for a change. When their workers have stayed for a considerable amount of time without calling for a strike, the company may not be moved when the employees threaten to call for a strike. They may have been used to the routine of them working and hence getting the money that they need and don’t bother to think about the losses that may occur to the company. They may also ignore them thinking that it will not take long before they consent (Arnesen, 2007). The company may underestimate the ability of the workers to paralyse the activities of the company and think that they will issue certain threats to move them. Some companies lack good tactics of negotiations and mainly use threats to influence the decisions of their employees. The company may also take for granted the efforts that are being put in by their employees until when they decide to down their tools.

This is the situation that was encountered by General Motors when their employees went on strike. The Company earns an average of 40 million daily when in operation and this was the amount of money that they lost when the workers decided to go on strike. As the days went by and the workers were still not willing to go back to their work, the company continued to count more losses (Davis, 1999). The strike basically affected most of the activities of North America as the company slowed down in making the negotiations. Even though the employees did not physically engage in violent acts to cause losses to the company, they not engaging in their daily production activities of the company negatively impacted on its production. Many years have passed since the occurrence of the strike, but the impacts are still being felt by the company. The company was unable to make sales during that period of time basically because they lacked important commodities. The strike must have served as a lesson not only to the company but also to other companies who may have ignored the plea of their employees in one way or the other.

Strategies of both sides of the negotiation (UAW and GM)

United Auto Workers (UAW) is a representation of an average of 180, 000 auto workers in United States. The organisation was mainly formed to look into the issues of auto workers. Before the commencement of the strike, UAW had received a report of the new labour laws that had been introduced by General Motors. According to the union, such laws would deny the workers the job security they needed among other issues. It was hence agreed that they enter into negotiations with the company so that the rules are revised. In the process, the union told the workers to prepare to go on strike if the negotiations did not bare fruit. This is a decision that was not received well by General Motors but the union was fulfilling its role of defending its members. UAW made it clear that they were not interested in calling a strike more than to see their members taken good care of by the company (Gonyea & Zwerdling, 1998). The union was hence pushing for negotiations with the company to prevent the strike from occurring. The unwilling attitude that the company showed towards the union aggravated them to tell their members to be ready for the strike.

General Motors and United Auto Workers were to enter into negotiations to discuss the issues that affected the company especially in relation to the workers and to find a long term solution towards them. A statement from the company also admitted that they were willing and ready to discuss with the union concerning the issues of the company. The company also expressed optimism that the negotiations will bear fruit the soonest. The negotiations were basically aimed at the new labour contract that had been recommended by the company after the expiry of the previous labour contract. Reports revealed that both GM and UAW both had the necessary facilities that would enhance the occurrence of the strike. GM motors had a total of almost 33 billion dollars in cash which totalled up to about 65 days supply of cars and trucks. UAW on the other hand had a reserve of one billon dollars which would facilitate a strike for a period of one year. These are the kinds of attitudes that the two organisations held towards each other. They both felt that they were not very miserable whether the negotiations bore fruit or not.

During their negotiations, the company and the union mainly talked about the health care facilities of their employees that had retired. It was realised that the health care liabilities for such employees amount to 1000 dollars to every cost of one vehicle that was produced by the company. Detroit automakers hence wanted to reduce on the amount that was spent on this issue to enable them compete effectively with their foreign rivals. The workers of the company were however not willing to give upon their benefits because their medical health care was increasing rather than reducing (Bailey, 2005). The company mainly looked at what it was loosing in terms of profit and market share as it compared itself to other foreign companies. The company felt that it would earn more only if the allowances for the workers on medical care were reduced. The workers could not be satisfied with such a move because their medical expenses were not reducing but rather increasing. What they probably expected from the company at such moments was an increase on the same and not otherwise.

It was obviously expected that if the strike proceeded, it will have devastating effects on the company. There was a similar strike against two plants of General Motors in flint; Mitch which made the company to close for a period of fifty days. It was estimated that the strike made the company to loose 2.5 billion dollars and an additional of two points down the market share which the company has never recovered up to now. The strike that was around the corner was hence to be avoided by all means as it would not be predictable how long it would take. The two organisations were looking for a means that would enable the company make its desired profits and at the same time not compromising on health care facilities of their employees (Block, 2002). They were mainly discussing a health care trust fund that was called Voluntary Employee Beneficiary Association (VEBA). According to this association, the company was to provide the initial amount to fund the trust and then UAW would take the responsibility of managing the funds of the trust. The funds that were generated from such investments would take care of the medical requirements of all retired employees of the company (Postmes, 2006). This was a burden that would be relieved from the company and hence enabling it to save billions of money.

The issue of cutting down on the medical covers of employees for the sake of the companies desire to compete effectively with its rivals was considered as a greedy move by the employees (Lynch, 2007). UAW expressed concern on the job security of the employees of the company of which the company seemed to care less about. The issue of job security was the main agenda but there were also other issues that had not been effectively addressed by the company. General Motors on the other hand said that the company was spending too much on providing health care facilities for its employees and their workers. The comparison was mainly done in relation to the Japanese auto companies that were the main threat to its business. The bargaining chairman of UAW said that he had personally received suggestions from a number of people who wished that the employees did not go on strike. This was also the desire of the union, but he said that it may not be possible unless the issues they had aired to the company were resolved. The union was also faced with a challenge of discussing the other labour laws that had been made by other auto companies, but their predicted success was to be determined by their agreements with General Motors.


Despite the toughness that was expressed by both sides on the issue, a strike was going to have effects on the participants and others that depended on the company for their products. Apart from the losses that the company will experience, people that depended on the facilities of the company would also be affected as they would not access them. There are a number of individuals that mainly relied on the company for its automobile needs, they probably did not know of another company that dealt in similar products because they were accustomed to the General Motors. This would hence affect their movement and subsequently their activities (Waters & Garsten, 1998). Their loyal customers would be the most affected as they look for alternative ways to service their vehicles. The move would hence affect most of the transportation system and generally minimize on the productivity of the people. It made the people either arrive at their places of work late as they would spend more time looking for alternative means of reaching their places of work.

Even though the two conflicting parties were mainly looking at the losses and benefits they will incur from the strike. They forgot about how the entire country would be affected by the strike. The outcome of the strike was generally unpredictable because nobody knew how long the strike would take and its ultimate outcome. Apart from the workers and other stakeholders of the company, the economy of the country was also partly held by the company (Hanagan, 2008). Being one of the largest and most successful companies of the United States, it generates a substantial income to the governments coffer through taxes and other levies. The strike would hence affect the income of the country depending on the number of days it would take. There are also other people that benefited directly or indirectly from the services provided by the company. For instance the other small scale traders that bought the products of the company and sold them in retail will be denied of such services. There would also be a drain in technological expertise as the striking workers would stay idle without any thing to do. Some of them would resolve to engaging in other economic activities that are not necessarily within their line of production and hence being a waste to themselves and the country. The angry workers are also bound to engage in other unprofitable acts that would negatively impact on their families.

The outcome

The negotiations between the company and the union failed to bear fruits as the two parties failed to reach a consensus. UAW failed to convince GM that the trust would actually minimize on the expenditure of the company. GM may have already made up their mind to reduce on the medical allowances of their workers and were hoping that they would convince the union in its line of reasoning. Considering the two parties, they both felt influential enough to make their demands be accepted by the other parties. They seemed to reason on different grounds that were not making sense to each other. The union was focused on the welfare of the workers while the company was focused on countering their rivals (Gonyea, 1998). The company wanted an immediate plan to increase their profits while the union was offering them a long term plan to increase their profits. This was basically the point of conflict for these two parties which ultimately led to the strike that lasted 67 days. Just as it was predicted, the company suffered the most as it lost a lot of money to their competitors who took advantage of the situation to make more money.

The strike tarnished the name of the company due to what was displayed in the media. It was now known that the company cared more about their income rather than the welfare of their employees. This hence made the company to lose the trust of some of their customers who resolved to get what they needed from other companies. The irony of the whole situation was that the company was aiming at increasing its profits, but instead it lost much more to their competitors that they were aimed at conquering. Some of the workers of the company were captured by other companies of which some never came back. Transportation in United States was tampered with considering the number of automobiles that were depending on the company (Tolliday, 1998). The strike also affected the employees psychologically as its outcome was unpredictable. It was difficult to gauge on the party that was not acting fairly considering that they all had their own interests at heart. ‘United Auto Workers’ is mainly sponsored by the workers; it could hence not run without the support of such workers. It was hence obliged to defend them so that its activities are not tampered with. General Motors is also responsible for the income of the workers; it is the company that has employed them. There is hence a mutual benefit that the workers and the company benefit from each other which can not be underestimated.

The core of these discussions, and alternative negotiation processes that may have helped expedite the outcome

The aim of the discussion is to recognize the fact the two parties were important to each other and there was hence need for an agreement. The union could not survive without the workers and the company could also not survive without the workers, they depended on each other. The failure of the two parties to reach an agreement that would stop the strike revealed that none of them was willing to lie down. Each party had its desires and they felt they were the most important and that their needs were paramount. Even though UAW was aimed at coming up with a solution that will be beneficial to the company and the workers, the idea seemed to have come at a much later stage when the company could not reverse (Pearson, 1998). It was at a time when the labour law had already been reached on by the company and the union felt dissatisfaction on the same. The idea would have been beneficial if it was considered earlier. The company could have had considered all the options available and considered that the implementation of the law would make it achieve its targets. The suggestions by the union of wanting the company to grant it a large amount of initial capital to invest in the trust rather than implementing their suggestion immediately was untimely.

The company management would need more time to give consideration to the idea before it was implemented. The misunderstanding must have a rose due to the pressure that was mounted on the company by the union to implement the idea immediately. There was a conflict of interests which probably needed more time for the parties to sit down and agree. However, the time allowance that was given by the union must have been too short for such an agreement to be reached at. Considering the clash, the company and the union needed an immediate alternative that would prevent the occurrence of the strike not just for the moment but also the future. The steps that were to be taken by company would have given the union hope that the welfare of the workers was in their hands and that they would not employ measure that threatened the security of employees (Heitmann, 2009). If the idea of voluntary trust was considered to be a better option by the company, yet they needed more time to implement it, then they needed to negotiate it further with the union. The idea came up at a crucial point when the union had purposed to make the workers go on strike unless their demands were met. It was also a crucial time for the company that had also purposed to cut down on medical allowances of its employees to compete effectively.

The UAW only wanted to hear from the company that they are not going to compromise on the welfare of the workers to make profits. The union wanted to open their eyes to understand that they can still make the profits they need only if they were ready to part with some initial funds. If the company was probably not able to raise that amount considering the short notice granted to it by the union, the company management would have told the union that they will put it into consideration after personally discussing it (Randall, 1998). Even though the entire blame was channelled to General Motors, it was to be understood that the company needed to make adjustments that they had not earlier budgeted for. The union was mainly pushing for what they felt was right not considering the adjustments that the company had to make. The union was failing to understand that the company being the main to fund the trust; they were faced with the challenge of implementing it even considering the long term benefits that were attached to it. The company may have also calculated what it had to part with in comparison to their initial decisions of cutting on the allowances and seen the latter still beneficial. The company wanted an idea that would ensure that they still gained the profits that they needed instead of cutting on the medical allowance.

The union should also have understood that before the company came up with the decision of cutting down on the medical allowance of its employees, they had considered all the available options and finally reached to the decision. The company may have felt undermined by the union which thought that its idea was the best. The union was actually not suggesting to the company about the trust but rather imposing. Such an imposition could not be accepted by the company and resisted to prove to the union that it also has its rights as a company. It might have been advisable that, before the union pushed for the implementation of the trust the company would have tabled it as a suggestion and not as a workable solution (Daft, 1998). This would have given the two parties a chance to look at other measures that may have been satisfactory to both the union and the company. As things stood, it was like every party was not actually coming to negotiate on a move forward but to convince the other that the idea they had in mind should be accepted as the best. When entering into any negotiations, no party should come with the intentions of convincing the other party that their ideas and suggestions are the best. The possibility of such an outcome is that no party will be willing to step down to allow the other party to win. Even if the idea is good, it may not be accepted simply because of its dignity.

A negotiation that will bear fruit is that where by both parties are willing to equally sacrifice so that one is not left to suffer at the expense of the other. The company may have considered that the entire burden of funding the trust would be upon them and that the union would benefit at its expense (CQ Press, 1999). It was an investment project that the union wanted to enter into. This was considered to be an alternative organisation that would obviously be for profit making. The company was to provide the capital yet it would not benefit much from it. The other fear of the company would have also been to see the organisation growing even stronger when the investment succeeds. This would have been used as a platform to manipulate and undermine the company. The resistance was hence birthed by the thought of the union gaining a competitive advantage over the company by using its capital. ‘General Motors’ considers itself as the boss to the union and there was no way it would have sponsored it to become more powerful than the company (Carbaugh, 2008). Stooping low to the ideas of the organisation would have made the union push for other undesirable suggestions that would generally undermine the activities of the company. The company wanted to remain on the forefront while the union wanted to prove its influence.

The misunderstanding of who the boss was in the negotiation process prevented the two parties to reach a decision. There should first be an understanding of who the main party is in the negotiations so that they give each other the respect and appreciation they needed. Looking at the two, they were basically at the same level as they would not function without each other (Sesbi & Davis, 1998). The company depend on the workers for their services while the workers relied on the company for the funds. The fact remains that without each other, the company would not be in existence. They hence needed to carry out their negotiations with the recognition that failure of the same will equally impact negatively on them. The negotiations could not bear any fruit as long as one party felt to be higher than the other as it was. What they probably needed to consider was to put aside the idea of the trust funds and that of cutting on the medical allowances of their employees. They should have decided to carry out their bargains on new grounds and forget about what they personally desired. This would have made them think of ideas that would have been equally fair to the parties. As it were, one party wanted to gain at the expense of the other. This is something that would never be accepted especially if the parties have reached the peak of disagreement.


Negotiations form part and parcel of any two parties that are mutually depending on each other. Such negotiations need to form the daily activities of the parties so that they know how to effectively serve each other. The unsuccessful negotiations between United Auto Workers and General Motors clearly showed that there was a lack of a continuous channel of communication. They probably thought of talking to each other when an issue arose (Davis & Chen, 1998). This means that there was no close relationship between the company and the union despite the benefits they drew from each other. Their dependence on each other had been taken for granted until when they discovered that they had conflicting issues that they needed to solve. If there were continuous relations between the organisation and the union, such ideas would have already been suggested and implemented without having to attract the attention of the media. What aggravated the strike was basically because the media had heard of the rising issues between the company and the union. They were hence looking forward to seeing who will win which both the company and the union wanted to be regarded as the winner. All eyes were on the company to see whether it would lay down its decisions and embrace the suggestions of their workers. The prior statements that had been released prior to the strike to show that they were both prepared for the strike revealed their adamant nature. It was either their suggestions to be implemented or they go on strike.


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