Playing the Game: Negotiation Tactics in the UAW Strikes
A C-Suite Quick Take
Both the UAW and the Detroit 3 are using innovative tactics as the strikes wear on.
The UAW is maximizing publicity while minimizing pain - not just to members and its strike fund, but also to the Detroit 3.
The UAW, as it expands its strikes from week to week, is trying to play the Detroit 3 against one another.
The last-minute reprieve for Stellantis in last week’s UAW announcement is a sign that playing off the Detroit 3 is working, at least in part.
The Detroit 3 are, belatedly, trying to counter the UAW’s PR offensive.
Ford’s announcement of a delay in its battery plant investment is a direct counter to UAW pressure.
Game theory provides insights on the tactics used by each side.
Companies need to plan and prepare for more hostile union negotiations and game theory would help.
The UAW is limiting the impact of its strikes on the Detroit 3. The selective, partial strikes protect the paychecks of most members and extend the life of its strike fund. But the UAW, in its choice of targets as it escalates weekly, is also deliberately limiting the damage to the companies. The weekly escalations produce new round of headlines, but the UAW has not yet closed any of the full-size truck plants that provide the large majority of the profits of the Detroit 3. Why not?
Game theory provides insights. Striking the full-size truck plants would destroy value – each company makes about $25M/day from each plant which it might have trouble recovering after a strike. The UAW wants a bigger share of the pie, not to shrink the pie. Avoiding the full-size truck plant is also a blocking move; it discourages the companies from using their “nuclear option” of a lockout. A lockout would be highly risky in any event. The UAW might view a lockout as an existential threat, prolonging the strike and poisoning labor relations and plant cultures for many years to come. Since the companies are still making money as long as the truck plants produce, such a risk seems unthinkable.
More importantly, postponing striking full-size truck plants helps the UAW divide the Detroit 3. Traditionally, the UAW tried to encourage the companies to bid against each other in the early phases of bargaining. Each company wanted to be designated “lead” since that afforded the chance to craft the “pattern” agreement in bargaining, prioritizing issues they cared most about and offering concessions they found palatable.
For fifty years there was no major national strike, so being lead had only upside benefit. In 2023 – as in 2019 – a strike was certain, so none of the Detroit 3 wanted to be lead. The UAW instead has been using strike escalations as sticks and carrots for the companies. Ford was exempted from the escalation to parts distribution centers at GM and Stellantis on September 22nd, with Fain citing concessions that Ford had tentatively made. Stellantis avoided the additional assembly plant strikes at Ford and GM announced on September 29th, with Fain citing favorable actions.
The favor shown Stellantis was a surprise. Reuters and Bloomberg reported at 10 AM EDT that all 3 companies would have plants added, but - after a delay of the press announcement - Fain did not add a Stellantis plant. Apparently, Stellantis made a last-minute offer – a sign that the UAW tactics to provoke a bidding war are working.
Usually, the Detroit 3 let the UAW win the PR war during bargaining. Everyone – whether in union or company leadership – wants any agreement to be ratified by the UAW members. That becomes more likely if the members believe that the UAW leadership “won”. Showing “toughness” makes the win more credible, allowing every gain achieved to be framed as the result of superior bargaining and union solidarity. But – in 2023 – the UAW’s PR may make ratification harder by demonizing the companies and raising member expectations. The Detroit 3 have pushed back, with senior leaders criticizing the UAW approach, touting their offers, and arguing that competitiveness and required investment in new products prevents them from meeting excessive demands. This belated effort seems to have little effect, but at least offers a counter narrative.
Ford also made a more substantive counter move. It announced that it was putting on hold plans to build a battery plant in Michigan. The plant was controversial, due to Ford’s decision to use Chinese technology. But the decision to publicly delay the investment seems deliberately designed to show the potential cost of UAW demands, with an interview with Ford CEO Farley reinforcing that point.
This round of UAW negotiations shows that labor-management relations have entered a new, more confrontational phase. The old playbooks will no longer work and companies need to take a more 3-dimensional, game-theoretic approach to bargaining to manage the risk and improve their outcomes. A future C-Suite article will discuss these 3-D strategies.