Purchasing and Negotiation Training

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

In the 1990s, I did over a thousand public seminars, mostly in the US but also Canada and Europe.  An embedded necessity of that profession is travel.  Some weeks, I flew six times per week.  Over the ensuing twenty years, while not traveling at that pace anymore, I have accumulated over 2 million air miles.  So it is no surprise that any news stories about air travel or airplanes attract my interest.

In November, Mike Baker  of the Associated Press Seattle bureau penned a story about Boeing reaching agreement with the State of Washington for a $9 Billion tax break.  The tax savings, extending into 2040, are designed to keep production of the 777X generation of airplanes in Washington, mostly in the Everett (Seattle area) plant.

Although signed by Governor Jay Inslee in a very public ceremony on Monday, 11 November, 2013.  However, later in that same week, Thursday, 14 November, the Machinist Union District 751  rejected an agreement that would have insured that the 777X generation of aircraft would be built in Everett.

What to hell were they thinking? 

The Union cannot strike until the current agreement with Boeing expires in 2016.  In the interim, Boeing can dangle the 777X work to a series of locations.  On November 24, USA Today reported that Boeing had solicited bids from fifteen potential sites  Boeing says it will choose a site within three months.

Was Boeing bluffing?  Washington’s Governor Inslee and U.S. Senator Patty Murray,  both liberal Democrats, apparently do not believe that Boeing is bluffing.  Even the president of the International Association of Machinists in Washington, D.C., Tom Buffenbarger  wanted District 751 to take Boeing’s offer. Incredibly, the Machinists district president, Tom Wroblewski, called the offer “crap”.

Have the Union members forgotten just four years ago when Boeing demanded a 10 year no-strike deal to keep the 787 line in Everett.  The intransigent Union refused and now Boeing is making the planes in South Carolina, along with billions in investment in the local community.    Boeing was not bluffing in 2009 and likely are not now either.

The Union needs help in negotiation.   

If the Machinists want those jobs in Everett, they should send negotiators back to the table. That move is up to the Union and they should do it now!  Boeing will find a hospitable location to build the 777X.  It must price the airplane today for delivery in the ten years out so it must know its costs of production.  This is not difficult to understand.  Either the Machinist Union District 751 recognizes this obvious reality or they will read about the plane’s success in other states.

Four years ago, Boeing threatened to set up a second 787 line in South Carolina unless the union here agreed not to strike for 10 years. Then the political friends of labor said publicly it was not a bluff. In 2009, the union’s negotiators ignored this and said “no” to the company’s offer. Public announcements by labor stated that the Union “would not be stampeded.”

Huh?  The top pay ($33 to $43 per hour in various grades) remains, and continues to be protected from inflation — unlike most private-sector pay. Workers would have investment risk on their retirement, but most American workers have had to accept that. Boeing offered to fund the Machinists’ retirement savings with essentially a 10 percent match, and in the first few years even more.

A Seattle news source reported that the Union’s “decision to say no to Boeing’s offer cannot be explained by economics. It was emotional.”  For the Union to mount a Win-Win negotiation, it needs to get a lot more rational.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

In concert with Opango, a full-service e-learning company, my Science and Art of Negotiation online course will be offered in an expanded and more comprehensive version than previously available.  Opango’s innovative learning management system (LMS) facilitates the growth of online courses as an education and training alternative to live instructor led seminars.

Negotiation is the number one requested training topic amongst professional buyers.  In very many seminars and talks delivered to tens of thousands of business pros, the number one request has always been to be more “comfortable, confident, and competent in negotiation.”

Many business organizations call and email requests for in house negotiation training seminars but they either do not have enough people or budget.  While in person live interaction and customization to work site challenges is always the best solution, if we cannot overcome that hurdle, then the online course alternative is the next best choice.

To celebrate the new source of e-leaning, for a limited time, and while the supply lasts, registrants for The Science and Art of Negotiation will receive You’re the Buyer – You Negotiate It!  absolutely free.  What is more, for the first twenty registrants, use this coupon code for a 25% reduction in the registration price.  FVKRAERX

Ample real life examples illustrate, punctuate, and reinforce the course’s messages of success. The material combines many business experiences with a knack for simple and effective instructional design.

An outline of content is available here on the training tab of my web site.  A two minute video is viewable here.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note: this is Part Two of a two part series on ethanol in the US, its political roots and its disastrous environmental damage.  Click here for Part One.

What is scientific fact?

Scientific fact is never produced by consensus.  Science in general and mathematics in particular is unyielding in terms of standards of proof.  Mathematics is the template used by the balance of the natural sciences for proofs.  The precision of the “laws” of math and science are rigid and not subject to interpretation or “spin”.

For instance, we now refer to the Universal Law of Gravitational Attraction first theorized by Isaac Newton  in the 1680s.  This theory was subsequently proved and adopted worldwide as a scientific fact in the centuries since.  It was not until science discovered sub-atomic particles a century ago that we suspect that Newton’s Law might not be so universal.

Another example is the Bing Bang Theory of the creation origin of the Universe.  The key word is theory; it is not a scientific fact.  The Theory of Evolution is just that, a theory.  No matter how one thinks about evolution, the truth is that evolution, as theorized by Darwin and widely believed, is not a body of established scientific fact.  Unfortunately, many who care not for or know little for science still lump global warming deniers in the same class as holocaust deniers.  This is a scourge borne of political, not scientific beliefs.

The AP story refers to windmill farms to provide renewable fuels to combat global warming or climate change.  Unfortunately, these wildly inefficient Quixotic electricity generators kill eagles and other protected wildlife.  In the same vein, EPA  Administrator Gina McCarthy  is quoted in the story as saying about the environmental damage caused by ethanol, “This is what you give up if you do not recognize that renewable fuels have a place here.  Not all renewable fuels are corn based ethanol.”

As the kids say, “NO, DUH”.  Not all renewables have the devastating environmental effects that ethanol has either.  Maybe Ms. Murphy should educate herself on biomass fuels, for sources of superb fuels that vastly out perform ethanol in terms of Btu density and reduced greenhouse gases.  The story also casts ample doubt, if not aspersion on shaky government calculations proven to be inaccurate by independent third parties about ethanol reduces greenhouse gasses.  Bravo

The story predicts that EPA will reduce the amount of ethanol required to be mixed with gasoline in the face of withering criticisms and the abundant evidence of the failure of ethanol as an alternative fuel.  An unlikely coalition of oil producers, agricultural & food companies, and environmental groups is pushing for the elimination of the entire ethanol program.

As an illustration of politics prevailing over policy, the Obama administration stands by its ethanol mandate because it fears the fight with the agricultural lobby and the optics of aligning with “Big Oil”.  Predictably, the ethanol lobbying group, Renewable Fuels Association  spokesman denies any reason to change from ethanol.  Again, “NO, DUH”.  What else could he say?

The Obama administration continues to tout ethanol as an energy success and not an environmental failure.  However, government predictions and promises often fall dreadfully short.  ObamaCare and ethanol are but two examples.

Quo vadis?

Nothing will happen until the American people 1) recognize the problem and 2) get angry enough to act.  Both conditions are colliding in the face of overwhelming evidence.  Educate yourself and others and act in all of our economic and environment and sustainability interests.

Sustainability is the sole province of science and economics, never politics.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note:  This four part series of blog posts examines the Win-Win outcome of the 2008 strike at Volvo’s New River Truck Plant.  Parts One and Two deal with the background.  Parts Three and Four dissect the negotiation.  Facts, opinions, quotes, and some commentary were collected from research into local and industry press reports and documents of the two parties.  Some interesting influences in this dispute are analyzed in sections labeled NEGOTIATION ANALYSIS.

Was the UAW out of position? 

According to Chris Brady, president of Commercial Motor Vehicle Consulting,  “The strike won’t have a big impact on fleets for the time being simply because there are still plenty of trucks at dealerships. It’s not going to impact fleets from getting trucks because the companies all have excess [inventory].”  Brady added that, “The timing of the strike is not beneficial to the UAW. “The union is not in a great position right now.  They’d prefer to strike when [order] backlog is high.”

If this is so, the union picked a bad time for a fight.  Volvo could sell off inventory while creating a shortage in time for negotiation settlement.  The market was already deep in recession so the timing could not have been better for Volvo.

So what were the real issues?

There appears to have been three other contributing issues that played into the negotiation: recall & workforce sustainability, absenteeism, and technology.

Volvo’s Mies expressed the opinion that “people might be confusing recall issues with workforce stability issues.”  When parties report to the press about the progress of negotiation, the skeptical observer must impute a measure of spin to the party’s statement.  In this case however, Mies continued with a credible clarification.  “We do feel that we have to work with UAW to address the excessive amount of bumping of personnel in the facility (NRV plant) when we bring in additional people to work.”  The excessive amount of manpower movement in the facility has a negative impact on the quality of production and negative impact on the ability of the plant to be competitive.”

Absenteeism apparently played a big role.  Mies cited an “…excessive degree of absenteeism“, causing Volvo to “…maintain far more people than we would have to otherwise cover for the absenteeism that we have on a regular basis.”

Technology introduced at the plant in 2007 played a significant role.  As with any new technology, implementation problems must be expected.  Troubles with the technology caused Volvo production problems at the NRV plant.  The result was falling behind in customer orders.  The temporary solution was to hire more employees temporarily, even amidst the doldrums of the poor economy.  Volvo had intended to discharge as many as 650 temporary employees about the time the strike began in winter 2008.

Click here for Bob’s book and CDs

NEGOTIATION ANALYSIS     

The intertwined nature of these issues makes for a messy negotiation, a giant game of Whac–A-Mole.   It is important to recognize that negotiation is not done by checklist.  That is, Volvo and UAW could not check off a solution on technology, for example, because it had an impact on workforce sustainability, recall, and absenteeism.

This principle is identical to commercial negotiation where the impact on Quality, Service, Delivery, or Price  all affect the Total Cost of Ownership (TCO)  You cannot “agree” on Quality, check that box, and then move onto the next cost element. No matter how good the quality, if they cannot Deliver, the Quality is next to worthless.

The UAW may have been purposefully introducing Head Fake and Straw-man arguments.  If so, that would be bad faith and underserving of negotiation between two long time partners.  Absenteeism, bumping, recall, and technology had real and substantial influence on Volvo’s ability to compete and ultimately to stay in business at the NRV plant.

The denouement 

Members of UAW Local 2069 voted Saturday, 15 March, 2008 to ratify a new three-year contract with VTNA, ending a strike of more than six.  The contract was approved by 90 percent, according to the local union’s President Lester Hancock.   ive years later, in October of 2013, employees represented by United Auto Workers agreed to a five-year contract covering employees at the VTNA’s NRV plant at Dublin.

Denny Slagle, president and CEO of VTNA announced that “We are the only manufacturing group still building trucks for this market exclusively in the United States, and agreements like this one help us keep American manufacturing competitive”.  Working with the UAW, we’ve arrived at an agreement that increases Volvo Trucks’ long-term competitiveness in the North American market, while continuing to offer our employees a great quality of life.”  He also noted, “Volvo gained two points of market share in 2010 and the stability this agreement provides will help us continue that momentum as the market improves.”

NEGOTIATION ANALYSIS 

It seems that both UAW and Volvo learned and grew from the 2008 strike and collaborated five years later.  While this non-strike renewal does not constitute a streak or a predictor of future peace and love, it is an encouraging sign for labor and management.

Was there a winner and a loser?  I do not think so, at least as settlement is concerned.  The UAW may have initially adopted a Win-Lose strategy  .  If so, that was a foolish and destructive choice.  It would have been better to establish High Initial Demands as to its most important issues (presumably recall rights and workforce sustainability) while baking in concessions on lesser issues (presumably absenteeism and temporary workforce due to technology).

Volvo was facing overwhelming economic headwinds in winter of 2008.  They may have failed to fully disclose the threat to UAW or the union may have disregarded it.  This speaks to the importance of ongoing open and honest communication between two contracting parties.

During my 2013 visit to the NRV plant, preliminary negotiations on the ultimately renewed October 2013 may have already been underway, I detected no animus from either side.  On the contrary, there was a palpable collegial atmosphere projected no matter to whom I spoke.

It is the nastiness and lack of candor, which seems so much more endemic to labor-business negotiations, that keeps me persuaded of the wisdom of not participating.  Dealing with business pros, who understand the value of mutual benefit, is a more satisfying pursuit.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note: this is Part One of a two part series on ethanol in the US, its political roots and its disastrous environmental damage.  Click here for Part Two.

From a political perspective, the Associated Press (AP)  is not renowned as a right wing shill.  Accordingly, I was surprised by one recent story, “Golden Corn Not So Green”   Written by authors Dina Cappiello  National Environmentalist Reporter and Matt Apuzzo , two journalist with impressive credentials,the story ultimately incorporates some science, more so the digital version, but begins with politics.

During the winter 2007 Iowa Caucuses, then presidential candidate Obama extoled the virtues of home grown corn and ethanol to the crowd economically married such agriculture.  Also in 2007, then President Bush signed a law requiring oil companies to add US produced ethanol to gasoline in percentages as high as 15% in some states.  Bush touted that ethanol would make the country “stronger, cleaner, and more secure” when he signed the bill but effectively left it to the next President to make ethanol work.  Instead, ethanol has been a failure and a fraud.

Fast forward almost 7 years

The story says that the subsequent ethanol era “has proved to be far more damaging to the environment than politicians promised and much worse than the government admits.”  Does the phrase, “If you like your doctor you can keep your doctor, period” come to mind?”  

What is worse, taxpayers subsidize the ethanol industry.  Whenever the government intrudes into the private markets with subsidies, it creates artificial influences that always have detrimental but not unforeseeable consequences.  This blog post entitled “The Food and Fuel Dilemma” published in April of 2012 presages other negative consequences in addition to those reported by the authors.

The AP story states that under the Obama administration “farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and contaminated water suppliers, according to an AP investigation.”  For comparison purposes, the five million acres cited in the story is larger than Yellowstone, Everglades, and Yosemite national parks combined.

Some major environmental damage done by ethanol is carbon dioxide (CO₂) released by plowing pristine land, filling in wetlands, and millions of pounds of fertilizer seeping into water supplies.  For a list of environmental sins uncovered by the AP study, click on this link.

The story omits any reference to the fact that ethanol production creates a larger carbon footprint than if it were not used at all.  From the perspective of sustainability, the story cites how many so called environmentalists and scientists have banded together to urge rejection of corn-based ethanol as bad environmental policy. Nevertheless, the Obama administration stands by it, highlighting its economic benefits to the farming industry while completely ignoring the consequential environmental damage.

The story proceeds to take a whack at drilling and fracking for oil and gas, alleging without proof that “environmental damage is well documented and severe.”  This unsupported allegation was disappointing.  However, this ellipsis may be due more to the authors’ unfamiliarity or confusion over directional drilling and recent advances in hydraulic fracturing  technologies rather than bias.

The story cites the Obama administration’s push to reduce greenhouse gasses and curtail global warming while silent on the hot controversy over whether global warming exists at all.

Some of us scientific types remember the story in Time magazine  from the early 1970s declaring that the consequence of man’s economic activity and disregard for the planet would lead to a new Ice Age within ten years.  This stunning tilt at windmills is now ignored by the current wave of “environmentalists” who continue Chicken Little’s “the sky is falling” hysteria.  Worse yet, despite the abundant evidence to the contrary, continue to predict the environmental Apocalypse.

The 1980s came and went without a new Ice Age but political “greenies” remain undaunted.  This is a reminiscent of the chronic predictors of the end of the world.  It may come, but just not at any known time.  Instead of the term “global warming”, a departure from the trend 40 years ago, the new vogue term du jour is the thoroughly undefinable term “climate change”  .  This group now refers to the “consensus” among a fraction of scientists worldwide  of which only 75% believe in global warming.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note:  This four part series of blog posts examines the Win-Win outcome of the 2008 strike at Volvo’s New River Truck Plant.  Parts One and Two deal with the background.  Parts Three and Four dissect the negotiation.  Facts, opinions, quotes, and some commentary were collected from research into local and industry press reports and documents of the two parties.  Some interesting influences in this dispute are analyzed in sections labeled NEGOTIATION ANALYSIS.

From the background, we know that economic forces beyond the control of the UAW or Volvo were the primary reason that reduction in the workforce could not be avoided.  To a lesser degree, the relocation of Mack truck operations to the Pennsylvania plant contributed to the job losses.

While observers cannot be certain of what was said at the bargaining table, we do know what was reported in the press, often via self-serving press releases issued by the parties.  We will examine these in a moment but there appears to be a lot of public dissembling, perhaps more on the part of UAW than Volvo.  This is the messy and devious part of labor and business negotiations that discourages me from participating.  Honest exchanges of motivations and information between trusting parties is where I excel in negotiation.

We know that all negotiations begin with High Initial Demands and proceed through concessions.  Local press, blogs, and position statements put out by the parties at the time are therefore a good starting point.

On January 8, representatives from both Volvo and UAW met to negotiate a new contract for union employees at Volvo’s New River Valley (NRV) Plant in Dublin. However, after the two parties were unable to reach an agreement by midnight of January 31 when the existing three-year contract ended, 2,467 union members working for VTNA in Dublin went on strike.

Union representatives stated that this strike is not about money, but about “unfair labor practices,” which include safety and seniority issues.  Volvo spokesperson Jim McNamara said that the Volvo was surprised by the allegations by union members in regards to health and safety issues.”

“The first thing that people need to understand from our perspective is that we wanted to keep negotiating and have everyone keep working while we negotiated,” John Mies, Volvo’s vice president of corporate communications, in an interview The Southwest Times. “We did not walk away from the table.”

As to Environmental Health & Safety (EH&S) issues cited by the UAW, Mies stated that, “Volvo is totally committed to having a healthy, safe environment in the NRV plant.”  The UAW demanded volumes of EH&S documents.  According to Mies, “Both before and during the negotiation process, there have been large requests for documents…  We were in the process of providing then when the UAW walked out.”   

Positions of the parties    UAW 

EH&S concerns were cited by union members as major issues of concern.  In response, John Mies said that Volvo is “totally committed to having a healthy, safe environment in the NRV plant.”  The UAW had requested a large volume of documents with respect to health and safety which were, according to Volvo, in the process of being produced when the UAW walked out of negotiations.

Health care was an issue for both sides. The union members had a so called “Cadillac” plan that was expensive for Volvo.  The UAW was also concerned with “recall rights”, a phrase relating to re-hiring laid off employees on terms more favorable to labor than management.

Click here for Bob’s book and CDs

NEGOTIATION ANALYSIS 

It is difficult to know exactly what was happening here.  As a self-insured operation, it is inimical to Volvo’s financial interests to cost itself money through poor EH&S practices.  Was this a Head Fake or Strawman tactic by the UAW?  If so, it was a poor choice.

Positions of the parties    VOLVO

By day 7 of the strike, no movement was perceptible to the outsider and talks were called off.  Volvo spokesman Jim McNamara was quoted in an interview as saying, “We do not comment on negotiations, which broke off when the union went on strike.  If it were up to Volvo, we would still be negotiating and people would still be at work.”  McNamara further stated that Volvo Trucks North America (VTNA)’s main focus remains “achieving a contract that is fair to both parties.” He said VTNA wants an agreement that “addresses improving workforce stability and reducing manpower movement [as well as] controlling the skyrocketing cost of healthcare and addressing a serious absentee problem that the UAW acknowledges.”

NEGOTIATION ANALYSIS 

Let’s pause to focus on this statement.  What does “workforce stability and reducing manpower movement” mean?  If it means a “no lay off” clause, that could lead to bloated and non-competitive labor costs.  Such labor excesses ruined Detroit.  Skyrocketing costs of healthcare and a serious absentee problem cannot be tolerated by any global manufacturer.  If the UAW acknowledged these contentions, shame on the union for allowing things to get his far.  Was the absentee problem due to a conscious effort on the part of the UAW to offset the planned reduction in force?  If true, that would be disingenuous, at best.

Volvo denied assertions regarding recall rights and health and safety concerns.  In a letter announcing a return to bargaining, Per Carlsson, president and chief executive officer of Volvo Trucks North America, focused on three separate issues: “increased health care cost sharing,” “the exceptionally high degree of manpower movement and higher-than-average absenteeism in the factory.”

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note:  This four part series of blog posts examines the Win-Win outcome of the 2008 strike at Volvo’s New River Truck Plant.  Parts One and Two deal with the background.  Parts Three and Four dissect the negotiation.

Facts, opinions, quotes, and some commentary were collected from research into local and industry press reports and documents of the two parties.  Some interesting influences in this dispute are analyzed in sections labeled NEGOTIATION ANALYSIS.

Historical background, continued

Economic crashes have entirely predictable results, replicated thousands of times.  Individuals and businesses immediately pare back on purchases.  This action is utterly prudent.

In 2011, I published an online course on How to Buy a New or Used Car.  Research for the course uncovered a startling fact.  Cars on the road then averaged 11.6 years old.  During the economic hard times, drivers were unwilling to risk the expense of new car loans when they were worried about losing their jobs.  They preferred to repair their older vehicles rather than take on a potentially unsupportable financial risk.  This caution applies equally to business.

Businesses, however, tend more to anticipate future trends.  For instance, buying futures contracts  on commodities is a prudent protection against risk.  Hiring or firing of employees is another business decision largely controlled by prospects for the future, as assessed by the business management.

In talking with a Volvo representative in 20013 at the supplier plant visit, he confirmed that Volvo’s judgment in 2008 was that the market was contracting and would continue to do so for an indeterminate time.  Under such constraints, the logical choice was to cut back on employees.

This reduction in force (RIF) occurred in almost every other major industry at the time. It is always unpleasant, but nonetheless a fact of economic reality.  If there is no little for 18 wheelers, purchases of auto steel, tires, glass, motors, transmissions, etc., all fall off and so is the demand for labor to assemble these parts.

Click to see Bob’s online training courses

Another important dynamic in the US automobile manufacturing industry at that time was the pending demise of General Motors Corporation, (GM)  This wild card’s full impact was not known at the time of the strike but Volvo undoubtedly factored in the risk potential.

Ultimately, the US government artificially propped up GM.  Ford Motors  another icon of Americana, neither sought nor obtained any such favorable treatment.  What could Volvo, a Swedish owner firm, expect?  GM bond holders went unpaid in favor of GM’s union contracts and pensions.  It was not a promising picture for auto industry manufacturers.

Due to the fall off in business, Volvo anticipated cutting 650 workers permanently near the end of January. However, that figure had nearly doubled by May, when 1,100 employees (38 percent of the Dublin plant’s workforce) were placed on furlough.  The cuts had been planned for earlier in the year, but a February strike delayed the action until mid-May.

As the economy faltered in late 2008, Volvo announced in August that as many as 200 more employees could be laid off in the fourth quarter of the year when production of Mack Trucks, a subsidiary of Volvo, was moved from the Dublin plant to Pennsylvania in a restructuring move.

A Volvo press release cited a plan to increase the efficiency of its North American operations.  Less than two weeks later, Volvo revealed that 973 of the workers laid off in May would be permanently cut as a result of a declining economy and the Mack pullout.  A notification letter from NRV’s human resources department stated “that only bargaining unit employees with UAW Local 2069 would actually suffer a permanent employment loss due to the Mack move.  Volvo no longer projects any of the laid off workers from May (those not affected by the Mack closure) will be recalled … and therefore, (the) temporary layoffs are being extended indefinitely and … should be considered permanent.”  

NEGOTIATION ANALYSIS

As we shall soon learn, little to no recognition of the economic reality of a soft market appeared, at least publicly, in the negotiations.  The issues presented by the UAW related to health and Safety while Volvo cited the high rate of absenteeism.  We cannot know for certain what was spoken at the negotiation table but publicly, neither parties attributed fault to the obvious economic conditions.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s note: In this blog, most references to other than commercial negotiations, between buyers and sellers, have been minimal.  A notable exception is the recent series of four posts on the military negotiations  between Grant and Lee that ended the Civil War.  Another departure was into business labor negotiation of Boeing vs. Machinists Union surrounding the 787 Dreamliner plant in South Carolina.   This series represents another foray into business labor negotiation.

This time we will examine the Win-Win outcome of the 2008 strike at Volvo’s New River Truck Plant in Dublin, VA  in this four part story.  Parts One and Two deal with the background because everyone comes to the negotiation table with his own experiences in addition to their own bias.  Nothing in humanity happens in a vacuum.  Past events are prologue to the future. Parts Three and Four dissect the negotiation.

Facts, opinions, quotes, and some commentary were collected from research into local and industry press reports and documents of the two parties.  Some interesting influences in this dispute are analyzed in sections labeled NEGOTIATION ANALYSIS.

Historical background 

When I heard about the 2008 strike during a plant tour in August, 2013, it recalled the intransigence of the UAW during the 1980s that ultimately resulted in the decimation of the vibrant US auto industry and the economic and physical ruination of the city of Detroit that continues to this day.  When I was a kid, Detroit’s population was almost 1.9 million; today it is barely 700,000.  This enormous drop is result of an economic reality.  When businesses fail, jobs suffer, and people move on and out.

This strike at Volvo’s largest truck manufacturing plant in the world put hundreds of union workers on the curb instead of on the line.  Negotiations began in early January 2008 when the contract expired before breaking down into a strike on February 01 that went on for 7 weeks.

Automobile manufacturing was on the rise in Asia since WW II and not recognized as a threat to the US industry as late as the 1970s.  Ironically, Dr. W. Edwards Deming,  an American scholar and teacher inspired and guided the spectacular rise of Japanese industry after World War II.

Negotiations between big labor and big management have always fascinated me because in my lifetime, the strategy of each party has mostly been Win-Lose .  In the auto industry, for the first three decades of the post WW II period, labor escalated its economic demands to uncompetitive heights as the global competition imposed crushing results on the auto industry.  Management had accommodated the excesses of labor demands to the breaking point.  Those lessons learned are now painful memories of how to fail in negotiation and destroy jobs.

In 2008, the US economy began its swirl around the bottom of the bowl.  Decades of excesses of both parties in Washington, DC artificially inflated values in the housing market.  Its collapse triggered colossal failures in the financial markets.  Those incompetent politicians who created these disasters attempted to fix it by enacting the Troubled Asset Relief Program (TARP) which only made the mess much worse.  The ascension of socialist policies following the overwhelming victories of Democrats in the fall 2008 elections produced a drastic decline in employment that is now structurally integrated into the US economy.

These opinions are admittedly arguable.  What is not arguable is the fact that businesses make decisions on their assessment of the future.  If you ever heard reference to the stock market having already factored in a future event, this is one example.  Companies must justify large capital expenditures to management and stock holders.  Any expansion, acquisition, or growth plan must be justified be analysis of likely (and even unlikely) future events.

Part Two examines the positions of the parties that led to the impasse.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s Note: This is the second in a two part series on my (so far) discouraging g effort to equip my north Texas home with solar powered electricity.  Part One sets link up the technical aspects and the second part addresses the financial considerations.  

Pricing and payback 

This is where the prospect of roof top solar becomes less appealing.  A 10kW system prices out at $42,000 or $4.20 per Watt.  Doing the project in 5 kW increments reduces the cost to $22,000 per increment or $4.40 per watt.  These budget figures alone make solar an un-doable project.  Energy saving alternatives such as reflective (radiant) barriers, increased insulation, and upgrades windows could all be done for less money and arguably a quicker payback.  But, as they say on infomercials, “Wait, there’s more.”

The local power service company in our area provides a 30% rebate up front which is paid to the solar contractor.  Applying the rebate to the $42,000 price creates a reduction of $12,600 bringing the net out of pocket to $29,600.  A Federal income tax credit of 30% on the $29,600 completed project further reduces the cost by $8,900 making the net out of pocket to $20,700 after tax credit.  The out of pocket for the 5kW system nets out at about $12,000.  This Residential Renewable Energy Tax Credit is set to expire in 2016.

The expected annual savings from the 10kW system is estimated but not guaranteed to be $1,800.  Dividing the $29,600 expense by the $1,800 savings, and ignoring the time value of money, the payback period is 16.5 years, a thoroughly lousy investment.

Another impact of the panels is the pricey addition to the house which raises insurance premiums.  Hail storms in north Texas have forced two re-roofs in thirteen years.  The warranty protection from the manufacturer against hail damage is not robust meaning that my insurance would need to cover the cost of new panels.  This solar roof top project is growing worse financially.

Other saving graces?

With such a dismal financial prospect, but a desire to capture the sun’s energy, I dug a bit deeper.  The technology is such that no storage batteries are required; the solar power is tied to the grid with inverters  and automatic transfer switches.  Bright winter days are best for energy creation and result in net power back to the grid.  The exact extent is being calculated but because electrical energy usage is minimal in the winter, the payment from the utility company cannot be substantial.  Worse yet, local utilities only pay the solar customer about 40% of the unit price they charge per kWh.  Yet, some so called “green generators” will buy back solar power for 100% of what it charges.  Unfortunately, the green generators charge about 25% more per kWh (on average) so no matter the route, the end point leads to the same dead end.

I will stay on this project starting with interviews of neighbors who have already experimented with solar panels and a though evaluation of payback analysis generated by the utility company and contractor.

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s Note: This is the first in a two part series on my (so far) discouraging effort to equip my north Texas home with solar powered electricity.  This first part sets up the technical aspects and the second part addresses the financial considerations.   

I am and have been interested in solar power for decades when the technology involved cumbersome panels that heated water and created inefficient electric power.  Since my Congressman lived two houses away on the same street, one Saturday morning in 1979 I knocked on his door to ask his assistance.  His wife instructed me to contact his local office.  When I did, his martinet minions were zero help.  That was then. 

Those days of solar power and ancient technology have been replaced by grid tied inverter systems.  Any electricity produced would have been very inefficient and expensive.  Now a Certified Green Purchasing Professional (CGPP), a lifelong environmentalist (in the apolitical sense), and an engineer by education, I am ready to revisit the roof top solar panel question. 

My interest rekindled after reading a story about the soaring market for residential roof top solar energy so I decided to pursue it.  At first blush, the $4.20/watt price tag seems enormous. The unit price changes very little as the size of the installation grows.  Despite the drastic price reduction of solar panels over the past few years, the cost of solar power remains dauntingly expensive.  

I own an average size home in north Texas, where summers are blistering hot and electricity bills, predominantly due to air conditioning, usually exceed $500 per summer month.  So I chased down local solar contractors to determine if conversion of my house to solar energy would be economically feasible.   

The technical basics 

According to the National Association of Home Builders,  my home is average size is average.  Electricity consumption ranges between 3,800 kilo-Watt-hour (kWh)  in summer to about 1,000  kWh in the winter.  Our south facing roof lines are on the front of the house, which is a barrier, albeit surmountable with the Home Owners’ Association (HOA).  One contractor recommended the black panels and framing as these are not as objectionable as the blue ones.   

Given the un-shaded roof areas available, our choices were a 5kW or a 10 kW system.  For those who are unfamiliar with the engineering and physics involved, kW or kilo-Watt is a unit of power, and kWh, or power through time, is a unit of energy.  The 5kW system requires 20 panels and measures 11 feet by 33 feet.  The 10 kW system needs double the panels and roof area.  Skipping the boring techno-mumbo-jumbo, depending upon the season a 5kW system energy output averages 750 kWh/month and the 10kW system averages 1,500 kWh/month.  Contractors allow for up to 20% deviation from these averages and assume 5.2 hours annual sun panel hours per day. 

Those are imprecise figures upon which to base a big financial decision.