Bargaining When the Future of an Industry Is at Stake: Lessons from UAW–Ford Collective Bargaining Negotiations

Twice in the past thirty years, automobile industry collective bargaining has taken place during times of wrenching industry crises — in 1982 and in 2007. In both cases, important innovations emerged from the crisis negotiations that were central to the viability of the industry and that had implications for the larger U.S. economy. This article provides a first‐hand account of the 2007 auto negotiations, with a focus on the bargaining between the United Auto Workers (UAW) and the Ford Motor Company, in which negotiators innovated both in the substantive agreement and in the bargaining process — before, during, and following the negotiations. These negotiations preceded the 2008 economic recession and government intervention in the industry, contributing to Ford's decision not to seek the same federal support that ultimately came to General Motors (GM) and Chrysler.

Beginning in 1981 and extending until after the 1982 negotiations were completed, more than 220,000 auto workers had been displaced from the industry due to a combination of a fuel crisis, a national recession, and increased foreign competition. In response, collective bargaining contracts were opened for negotiations prior to their expiration, and agreements were reached on joint training programs that ended up placing approximately three–quarters of the displaced workers in new jobs and careers by 1984. The joint training programs then evolved to serve as a foundation for reinforcing or expanding joint union–management programs focusing on safety, quality, employee involvement, training, work/family balance, and other matters. These joint programs became a model for many other industries and sectors. Job security provisions drafted in these negotiations provided the basis for the union to take on an increased role in and commitment to improving productivity in the industry.

In 2007, more than 100,000 workers were at risk from pressures similar to those facing the industry in 1982 — a fuel crisis, a national recession, and competition from foreign manufacturers (though this time from foreign manufacturers with production operations in North America, as well as abroad).

Additionally, the rising costs of health care and benefits for retirees were newer, acute pressures facing the parties. In response, an innovative Voluntary Employee Benefits Association (VEBA) was established, under which substantial retiree health benefit costs were removed from the company books and the union instantly became one of the largest single purchasers of health care in the country. As well, the parties joined the issues of jobs and competitive viability in substantive ways that went to the core of how business is conducted in this industry. In the UAW–Ford case, the bargaining process involved unprecedented transparency, a unique set of sessions during which the parties “bargained over how to bargain,” and a problem‐solving approach that was integral to the innovative solutions reached. The combination of an interest‐based approach to bargaining and shifts in the industry's patterns represents an important foundation for the successful future of the industry.

This article is a case study account of a pivotal negotiation. While historical and theoretical context is provided at the outset and analysis is offered in various places, it is primarily presented to provide first‐person perspectives from the participants. Many direct quotes are included in this case study, taken from statements made in public or private forums associated with the negotiations, including private prenegotiations, joint preparation events, and public postnegotiation presentations at the University of Illinois and at the 2008 National Labor‐Management Conference (UAW‐Ford Presentation, 2008b), sponsored by the Federal Mediation and Conciliation Service. None of the individual quotes should be taken as formal statements on behalf of the UAW or the Ford Motor Company. While not present at the bargaining table, I was involved in joint quality transformation initiatives with the UAW and Ford, helped facilitate prenegotiation preparations, and served as moderator for public presentations on the negotiations.

The advantage of this close, case study approach is that it features extensive primary source material. The limitation is that the article may reflect a positive bias toward the negotiation and its results. This article can be understood in the tradition of action research, a concept first pioneered by Kurt Lewin (1946), in which learning about social systems is advanced through interactions with those systems. These ideas were further advanced by Chris Argyris and Donald Schön (1974), who observed that direct engagement helps to distinguish espoused theories from theories in use; by Ed Schein (1999), who observed that deeply embedded cultural assumptions are more visible when those holding those assumptions directly engage in systems change; and others (Senge 1990; Torbert 1991).

The case is not presented in strict chronological order. Key themes or developments are identified in each section of the case and the time sequence is traced chronologically within each section. For a new theme, however, the beginning of the story will often move back in time on that dimension.

Historically, auto negotiations have served as a bellwether for the U.S. economy. In the first three decades following the organization of the industry by the UAW union (from the 1940s to the 1960s), agreements on employer‐funded health‐care benefits, employer‐funded retirement benefits, cost‐of‐living allowances, the annual improvement factor (which directly linked gains in wages with gains in productivity), and otherprovisions set a pattern that helped to elevate collective bargaining to the level where it became seen as an institution integral to the growth of the American middle class and as a key driver of the “American dream” (Cartwright 1955; Katz 1985; Kochan 2005). Over the years, increasingly elaborate patterns and processes were established around auto industry collective bargaining, reflecting just how much was at stake for the parties and for society. Traditionally, the UAW would select a “target” employer (usually the one with the strongest balance sheet) and then negotiate an agreement that would set the pattern for the industry. This provided the archetypical example of what came to be termed “pattern bargaining.”

In 1982, the patterns were disrupted. The industry faced unprecedented losses in market share and overall industry sales due to international competition, shifting preferences for smaller, more fuel‐efficient vehicles, and a major economic recession. The UAW selected GM as the target company but was unable to reach an agreement. Executives from Ford approached the UAW and requested that the bargaining shift so that Ford could be in the lead. Ford placed on the table a joint approach to training displaced workers and an integrated approach centered on “mutual growth” to help revitalize the industry. The results, as has been noted, became a benchmark for handling the dislocation of large numbers of workers in a given industry, with more than three–quarters of the displaced workers retrained and placed in new jobs in other industries. This involved extensive cooperation with local and state governments, community colleges, and other stakeholders (Ferman et al. 1991; Singleton 1992).

The 1982 negotiations had a competitive subtext. Although the union is deeply committed to advancing the interests of all its members, the different employers compete with each other. In this case, Ford had already completed a substantial reduction in its workforce, while GM had not yet done so. Thus, when Ford also agreed to a new employment security arrangement for the remaining employees, GM was saddled with a pattern agreement in which further workforce reductions were much more complicated and more costly. This gave Ford a competitive advantage over GM for much of the 1980s.¹

International competition in the auto industry was increasing at this time, particularly because of the introduction into the market of more fuel‐efficient European and Japanese imported cars (more than trucks). As political pressure increased around the growing share of imported vehicles in the U.S. market, foreign manufacturers began to locate component and final assembly operations in the United States — often referred to as “transplants.” Lean manufacturing practices that were initially seen as rooted in the more collective culture of Japan were successfully implemented with American workers in these transplant operations (Womack, Jones, and Roos 1990). Although a few of the transplants were unionized — notably the GM–Toyota joint venture known as New United Motors Manufacturing, Inc., the Ford–Mazda Flat Rock plant, and a few others — most were nonunion operations.

By the early 1990s, many scholars had documented a breakdown in pattern bargaining in various sectors (Capelli 1990), even if some scholars still argued that patterns in wage outcomes could still be found in the unionized sector (Ready 1990a, 1990b). The reduced ability of unions to take wages out of competition through institutionalized patterns in negotiations extended to Europe (Traxler, Brandl, and Glassner 2008) and was even reflected in conservative and almost unenforceable Australian legislation (since overturned) that made pattern bargaining illegal.

As noted, the changed competitive context motivated a broad range of joint initiatives by the UAW with domestic manufacturers, beginning in the late 1970s and early 1980s, that went beyond traditional joint safety committees to address quality, worker participation, training, and other matters. The joint programs were, however, largely separate from the collective bargaining process, which retained its ritualistic, adversarial norms.

Going into the 2007 negotiations, lead negotiators at GM did not want a repeat of their collapsed lead in the 1982 negotiations, which had given Ford a competitive advantage. The actual decision as to which employer would be the target was in the hands of the UAW, and the decision would not be made until the end of August. This situation was a reversal of the historical pattern, in which a wage increase negotiated at the strongest employer would be imposed on the rest of the industry. Now, it was a case of the union seeking the minimum concessions from the most vulnerable employer. At the time the “Big Three” (now referred to as the “Detroit Three”) were all suffering declining market share and Chrysler's ownership by outside equity capital represented an unknown factor. In important ways, the different circumstances in each company were placing the future of pattern bargaining in the industry “on the table” in these negotiations.

Within the UAW–Ford relationship, each party was sounding highly contrasting themes. As UAW chief negotiator, Bob King, vice president (VP) responsible for Ford and the independent suppliers with UAW agreements, stated, the theme that people kept repeating was “promises made; promises broken” (UAW‐Ford Presentation 2008a). A number of factors were responsible, including the fact that some of the most productive plants, where the union had actively partnered with management to implement new work systems, were slated to be closed. This included Ford plants in Atlanta, Georgia; Batavia, Ohio; Norfolk, Virginia; and Wixom, Michigan. As well, the company had invested heavily over the previous decade in acquiring four European brands (Aston Martin, Jaguar, Land Rover, and Volvo) that union members felt were diverting investment from U.S. operations.

At the same time, Ford sounded a theme of economic crisis. “[T]he company was facing the very real possibility of bankruptcy,” said Ford's chief negotiator, Marty Mulloy, VP responsible for global labor affairs (UAW‐Ford Presentation 2008a). The company argued that it needed the union to work with it to prevent a downward spiral.

In this context, the union had to determine how much of this was traditional prebargaining rhetoric and how much of it was a genuine crisis for the company and the industry. As Bob King commented:

To summarize the challenges facing the UAW going into the negotiations, Wendy Fields‐Jacobs, the UAW's special assistant to the VP and international representative, stated:

Bill Dirksen, Ford's executive director for U.S. labor affairs, outlined the challenges facing management:

Compounding the substantive challenge, the parties faced process challenges, which Chuck Browning, the UAW's assistant director (UAW Ford department), summarized as follows:

Thus, going into the negotiations, powerful forces were at work with the potential to pull the parties apart, including shrinking market share, percieved broken promises, and an ingrained habit of traditional, adversarial bargaining styles. But other forces had the potential to enable them to work together, including a history of joint programs and a shared need for survival.

An important precursor to the 2007 UAW–Ford negotiations emerged in the 2003 auto negotiations. Many aspects of the 2003 negotiations followed the traditional bargaining process in the industry, during which more than three‐hundred negotiators were distributed among more than twenty subcommittees and a “main table” directed the process. One long‐time UAW negotiator, Joe Gafa, described the subcommittee process as “the obligatory three‐pass — we pass our demands to the company, they pass their counter proposals back to us, and we go back and forth three times with neither side making much movement” (UAW‐Ford Bargaining Over How to Bargain, Session I 2007). An exception to this process occurred in the area of quality.

Joint UAW–Ford efforts to improve quality date back to the early 1980s; however, most of these joint efforts represented what can be termed “add‐on” programs — joint quality initiatives that were implemented in addition to the company's quality operations. These joint efforts were further undercut in the late 1990s as a result of a company‐wide restructuring initiative entitled “Ford 2000.” By the early 2000s, concerns developed that Ford's quality improvements were not advancing as fast as its competitors. Most of the efforts of the national joint quality committee were focused on communications about quality, rather than initiatives aimed at changing quality practices.

In 2002, Dan Brooks was given the leadership role on the union side for the joint quality efforts, and he explained the union's approach as follows:

By contrast, lead negotiators on both sides of the quality subcommittee began their work by articulating a shared vision of what both sides wanted to achieve in terms of quality results. As Dan Brooks explained:

After the negotiations, the parties followed through on joint quality training, establishing joint charters for quality committees at all levels, and driving the QOS into frontline operations. They also initiated greater union involvement on quality issues in new product development.

Overall, in the space of less than five years, from 2002 to 2007, Ford went from being among the lowest in quality in the auto industry to being among the industry leaders. By 2007, the results were clear and dramatic. The company achieved more than $1 billion in warranty savings in 2007 as a result of quality gains and ended up in a three‐way tie with Toyota and Honda for overall quality in the J. D. Powers survey. Senior corporate leaders credited the union for its role as a key partner and driver in the quality improvements. The 2003 negotiations were an integral part of this process, codifying joint innovations and extending them throughout business operations. Thus, the way the parties approached the quality issues in the 2003 negotiations had a high degree of credibility during preparations for the 2007 negotiation.

Despite the obvious overall market shift away from trucks, which had been Ford's most profitable and successful market segment, and Ford's publicly visible decline in market share, the company knew that the UAW would need a detailed understanding of the state of the business before entering the 2007 negotiations. Beginning in early 2006, the company made a decision at the highest executive levels to approach the negotiations with an unprecedented level of transparency. Chief Ford negotiator Mulloy explained:

In this process, the union was invited to bring in its own financial analysts to examine the company's finances and operations. UAW negotiator King explained:

Even the company's cycle plan for new products — the most secret of business information — was shared with the union for the first time.

Once the analysis was complete, the results were sobering. Perkins reported that the business situation was at least as bad as the company had represented. A series of briefings were then held for regional and local union leaders, with Perkins attending and taking questions from the floor. Reflecting on the process, King said, “No company has been as open as Ford has been and that makes a substantial difference” (UAW‐Ford Bargaining Over How to Bargain, Session I 2007).

Mulloy later commented that “there may not be a company in the world that would share the kind of information that we shared with the UAW in terms of our finances, our product plans, and access to our senior leaders. At the end of the day, it came down to the fact that we trusted these guys — we are really in it together” (UAW‐Ford Presentation 2008a).

By January 2006, more than a year and a half prior to the opening of negotiations, the UAW knew that Ford was facing serious financial difficulties. Anticipating strong pressure for concessions in national negotiations in 2007, the UAW made a bold strategic move. UAW international representative Chuck Browning, who led the union in conducting what became a special round of local negotiations, stated,

As the lead negotiator for the UAW in local negotiations, Browning embarked with his counterparts at Ford on a marathon set of negotiations involving local union and management leadership in forty‐one separate plants — approximately one plant a week throughout 2006 and into 2007. This represented nearly all of Ford's assembly, stamping, engine, and drive‐train production facilities in the United States. While there has been a long history of negotiating what are sometimes termed “competitive operating agreements” (COAs) or “modern operating agreements” at auto plants, this set of forty‐one sequential local COA negotiations in the space of less than one year is unprecedented in the history of U.S. collective bargaining.

The process began with the union's independent economic analysis of the company and a series of union meetings with divisional manufacturing management leadership. The union met with divisional leaders (assembly, stamping, etc.) to identify what they felt were the necessary steps to improve the financial outlook in each division. “Then,” said Browning, “we were able to also identify work that could come in and things that could happen to provide increased job security in the plants. So, going to the local unions, we had a clear vision of what needed to be done” (UAW‐Ford Presentation 2008a).

Next, each local union had to receive authorization from local members to open up the local agreement for negotiations. This involved a membership briefing on the competitive situation of the company and that plant. Many of these sessions featured a briefing by Perkins, the independent expert, as well as a presentation by a senior manufacturing executive, often Joe Hinrichs, the VP for manufacturing. Particularly important was the fact that the briefings were consistent with each other. “The data were very credible,” Browning explained “The union checked it out. The company checked it out. All the stakeholders were saying the same thing. That's pretty powerful when that happens. . . . It's not always identical, I should say, but it is still consistent. Also, we had clear targets. That made things easier, too” (UAW‐Ford Presentation 2008a).

It was not, however, just a one‐way or top‐down process. “As smart as we all think we are,” continued Browning, “it's always our strong opinion that it's the people in the plants — the people building the car and their supervisors — at the end of the day who make everything happen. . . . We took all the knowledge that we had from a higher level, went into each facility and talked to the local union, talked to each operating committee, and got their input on what needed to happen to make that particular location cost effective” (UAW‐Ford Presentation 2008a).

The union also approached the negotiations with an eye toward additional language changes (beyond potential new investment or work in the location) that might be important to the local union, “Since we were changing the old way of doing business, you know, guess what?” Browning explained. “Some things did not work that well for us. Even though the company was driving what they needed to change for business reasons, we took the time to say if we are going to change, why don't we improve some of the things that haven't worked for us either contractually? And we did that” (UAW‐Ford Presentation 2008a).

The actual negotiations involved “locking” the bargaining teams in a room for anywhere from seventeen to thirty‐five hours while they addressed an agenda that included work rules, operating practices, and potential future investment in the plant.² Many of the work rule changes involved increases in efficiency that resulted in some work intensification, such as increasing the number of automated machining operations overseen by a single worker. Other changes involved matters that improved performance and that were as welcome to workers as they were to management, such as consistent administration of attendance and overtime policies or adherence to quality procedures. The commitments on future investment were based on very specific assessments of product lines when a business case could be made for new technology, expanded capacity, and even some insourcing of products previously outsourced.

In each case, an agreement was reached that was then brought back to the local membership for ratification. Most of the agreements were ratified by 80 percent of the members in each location, with a number ratified at levels above 90 percent. While estimates vary on the total savings achieved through operational improvements, they could be as high as $500 million dollars — without any change in pay or benefit levels. In return, the union achieved specific commitments to invest in the operations. Also, local unions were able to identify specific operating issues in each plant that they wanted addressed. Overall, the bargaining process established important norms, including full transparency by the company on the economic situation and investment picture for each plant, as well as constructive, problem‐solving dialogue on the traditionally adversarial issue of work practices.

Browning described the process this way:

In summing up the COA experience, Browning observed:

In the fall of 2006, with the COA negotiations well under way, I joined four representatives from the company (led by VP Marty Mulloy) and five from the union (led by VP Bob King) at an informal dinner meeting at a Catholic Retreat Center outside of Detroit. The focus of the discussion was on innovations in the collective bargaining process that might be relevant for the 2007 UAW–Ford negotiations. From the outset, both King and Mulloy agreed that the company and the union were facing dramatic challenges that were likely to require both sides to bargain in new ways.

Bill Dirksen, Ford's U.S. labor affairs executive director, said, reflecting on these challenges, “This much was clear. If we went through the same old processes that we used in the past, it was not going to yield us a different outcome. . . . We talked about the definition of insanity being doing the same thing over and over again and yet expecting different results. Well, we didn't want to fall into that trap” (UAW‐Ford Presentation 2008a).

In the following months, labor and management developed a plan to conduct a series of off‐site joint training sessions with lead negotiators from both sides. Staff from the UAW and Ford were assigned to develop the design for the session. Initially, the staff urged a very cautious design — limiting experiments with the bargaining process to selected subcommittees. The two chief negotiators rejected the more limited design and stated that the entire bargaining process had to be “on the table” as the parties bargained over how to bargain (Cutcher‐Gershenfeld 1994).

At the first session, Mulloy signaled an important shift within management: “Traditionally labor affairs has led negotiations and then shared the results with manufacturing. That has changed; manufacturing will be deeply engaged” (UAW‐Ford Bargaining Over How to Bargain, Session I 2007).³ Joe Hinrichs, then VP of North American manufacturing, spoke at this first joint session. “The UAW National Ford Department isn't much good without Ford and Ford isn't much good without the UAW and the workforce — let's recognize that from the get go,” Hinrichs said. “People have been frustrated about the bargaining process in the past. We have people's time and we need to have a process that respects and utilizes their time. We have difficult issues to get through and different perspectives to get through on these issues — to find solutions that work for everyone” (UAW‐Ford Bargaining Over How to Bargain, Session I 2007).

The visible leadership of manufacturing executives, not just labor relations staff, was a crucial feature at this session and throughout the negotiation. Hinrichs and other manufacturing leaders brought additional credibility and problem‐solving capability to discussions on the overall economic challenge facing the company and on specific business matters such as the sourcing work or QOSs. Moreover, they brought a highly pragmatic view, matching the bargaining process and the efforts of the participants to the issues that had to be resolved.

At the second session, the full group of approximately one‐hundred lead negotiators and subcommittee co‐chairs expressed their hopes for the 2007 bargaining process, including items such as:

• “open minds, open communication, and open discussions;

• both parties make it clear what they need and what their expectations are at the beginning of the negotiations;

• negotiate an agreement that will position the company to compete while maintaining the standard of living of the membership;

• successfully ratify a fair agreement that includes reinvestment in North America;

• the people who negotiate the agreements are around to help implement the agreements; and

• serve as an example of what companies and unions can do together”

(UAW‐Ford Bargaining Over How to Bargain, Session II, May 3, 2007).

The parties also identified their fears for the bargaining process, including the following:

• “the process will not be sufficient to address the issues;

• anger shuts down the process;

• Ford won't get up off the core/non‐core bull crap [referencing ‘non‐core’ parts of the business that can be outsourced];

• special or individual interests dominate instead of the overall interests of both parties;

• we don't get this thing right;

• we negotiate a destructive agreement for one or the other side;

• failure to implement;

• day‐to‐day operational issues will sidetrack us;

• there are people who are not in the room who will not support the process; and

• bankruptcy”

(UAW‐Ford Bargaining Over How to Bargain, Session II, May 3, 2007).

One dilemma that the parties faced was how to present formal demands from the UAW Collective Bargaining Convention without immediately triggering a counterdemand from the company and then ending up in a traditional, positional bargaining process. The UAW Collective Bargaining Convention had taken place in the summer of 2006, and the platform for negotiations with Ford, Chrysler, and GM was established there, with the overriding theme tied to the discontent of the workforce (such as the “promises made, promises broken” concerns noted by Bob King). Taking this into account, it was understood that the UAW would present its opening demands consistent with the mandate from the convention but that there would be no counterdemands from the company until after the overall vision, the underlying concerns, and the relevant data had been fully explored. Similarly, the union would not respond with counterdemands to opening issues raised by the company until after the joint visioning, analysis of interests, and joint data collection.

Bridgette Morehouse, one of the lead Ford managers responsible for the joint training sessions, described the process this way:

An additional process decision was the use of internal facilitators. “We also trained several internal facilitators that were seen as neutral to the bargaining approach,” Morehouse explained. “Within the twenty‐four subcommittees, we had a lot of people who were very experienced in the traditional way of bargaining and in the traditional approach. So, when you're getting into a stressful discussion or getting into some new ground, it's easy for people to go back to their way of doing things historically. . . . We had the facilitators who were trained, who could come in and kind of recalibrate the subcommittees if needed” (UAW‐Ford Presentation 2008a).

The standardized, structured format for bargaining established in the “Bargaining Over How to Bargain” sessions, was as follows:

1. Opening and Shared Vision: Each side will make opening statements on an issue (including the formal presentation of UAW demands as per the UAW constitution) that are designed to be constructive, and both will engage in a joint brainstorming process to identify those aspects of the issue on which there is a shared vision of success.

2. Joint Data Collection: Where appropriate, both sides are empowered to conduct joint data collection on the issue.

3. Analyze Underlying Interests: Both sides will engage in the joint identification of underlying interests that each has with respect to the issue — collected in separate lists of union interests and management interests — facilitated by the co‐chairs or by internal facilitators available on request.

4. Generate Options: Both sides will engage in full brainstorming of options on each issue, which includes the opening demands from the UAW as well as additional options based on the interests identified and the data collected — again with facilitation available on request.

5. Negotiate Agreements: Having discussed the elements of a shared vision, data, interests, and options, the parties will then engage in the bargaining toward agreement on each issue.

6. Main Table Calibration: While the major economic issues are reserved for the main table, most of the rest of the bargaining is distributed over subcommittees that will periodically update the main table on their efforts.

7. Anticipate Implementation: When agreements are reached on issues, the parties will also set in place clear action plans for implementation, specifying the who, what, when, where, why, and how needed to implement the agreement.

While the agreement was to follow a comprehensive process, the parties reserved the right to revert to traditional negotiations. “There was so much anger in the system,” said Bob King “After a lot of internal discussion with our local union leadership and our staff, we decided to try an interest‐based approach. We were always clear on both sides. We were going to try this and, if it worked, great. If it didn't work, then we'd fall back on a traditional approach” (UAW‐Ford Presentation 2008a).

The willingness of both sides to operate with a standardized process across all subcommittees and the main table reflected their joint experience with standardized, structured processes in quality, safety, and other aspects of business operations. At the same time, both sides had some concerns given how substantial the changes in the process were. To build capability with the new process and demonstrate that it was indeed effective, the UAW and Ford agreed to have four of the subcommittees begin bargaining a month before the official opening of negotiations using this process. These included subcommittees on safety, quality, sourcing, and grievances/discipline. Bill Dirksen explained:

Because the four initial subcommittees were operating constructively, the parties brought the full process forward for the entire national negotiations.

When bargaining officially opened on July 23, 2007, the UAW president, Ron Gettlefinger, framed the negotiations as important not just for the UAW, but for good jobs in America. “Last time around,” said Gettlefinger, “we talked about bargaining for families. This time around we are talking about bargaining for the country as a whole. . . . This is not just about us, these negotiations are about everybody.”

Joe Laymon, then group VP for human resources and labor affairs at Ford, highlighted the UAW–Ford relationship and sought to link it to Ford as an iconic American brand. “Today, we officially opened our twenty‐sixth round of bargaining with the United Auto Workers. I am proud that the relationship between Ford and the UAW has been defined by its openness and honesty. Doing this difficult work together strengthens us and puts Ford in a far better position to achieve its goals,” said Laymon. “Our shared mission is to do nothing less than reinvigorate an iconic American company. I know in my heart that we have the same belief, the best days are still ahead for Ford, and we are up to the task.”

Not all the bargaining was across the table between labor and management. An old adage in industrial relations says that it takes three agreements to get one — an agreement within labor, an agreement within management, and an agreement between labor and management. This process, which Richard Walton and Robert McKersie (1965) termed “intraorganizational bargaining,” shifted significantly on the management side in these negotiations. As Ford's Marty Mulloy commented:

The expanded role of line managers in the negotiations had also been reflected in the local negotiations on the competitive operating agreements, where plant managers and the number two line manager, termed the lean manufacturing manager in most locations, had played key roles. Importantly, all of the North American plant HR managers and lean manufacturing managers had been meeting on a quarterly basis since 2002 as part of the accelerated implementation of what are termed “lean” and “six sigma” practices for quality and effective operations and team‐based work systems in production operations — a process co‐led by senior line manufacturing executives and top HR executives. Thus, there had already been substantial integration between manufacturing and staff leading up to the negotiations. Within the UAW at the national level, the same internal functions did not need to be bridged, but there was tension because the paid staff of the union had been downsized in conjunction with the loss of dues‐paying members.⁴

The twenty‐four national subcommittees covered a broad range of topics including attendance, benefits, health and safety, health care, job security, overall economics, quality, pensions, skilled trades, sourcing, supplementary unemployment, training, and other topics. Although many of these issues involved conflicting as well as common interests the parties held to the collaborative process — jointly collecting data, asking questions, and exploring options. In some cases, issues were highly distributive and more intensive process support was needed. For example, the subcommittee on sourcing (outsourcing and insourcing of work) did reach a point where Bill Dirksen and Wendy Fields‐Jacobs met separately with the co‐chairs to keep the process on track. In other cases, facilitation assistance was called in. At the same time, some subcommittees that were addressing highly contentious issues, such as skilled trades, functioned much more smoothly than historically had been the case. Moreover, as Dan Brooks notes, “None of the groups became stuck or fell apart.” Normally, tensions would overwhelm the process in at least some of the subcommittees.

The work of the UAW–Ford subcommittees and the main table continued though the summer, as did negotiations at GM and Chrysler. During this time, there were preliminary signals sent by the UAW that the lead target employer for the 2007 negotiations would be GM. Then, at the end of August this decision was formally announced. In the GM negotiations, important elements of an agreement were coming together by the end of the summer, but a settlement proved elusive. On September 24, 2007, 73,000 UAW workers at GM were called out on strike for two days before the full package was finalized. On October 10, 2007, a five‐and‐one‐half‐hour strike took place at Chrysler before they accepted an agreement similar to the one the UAW reached with GM.⁵ In the case of the UAW–Ford negotiations, the parties reached agreement without a work stoppage and with some important modifications in the agreement (as outlined in the next section of the article). Reflecting on the bargaining process, Bill Dirksen of Ford observed:

The 2007 UAW–Ford negotiations had challenging issues on the table for labor and management. Rising labor costs was one of them. Ford uses what they call a “penny sheet” to calculate labor costs. In 2007, explained Marty Mulloy, their penny sheet was $65 an hour. He said:

Perhaps the most dramatic change to come out of the negotiations involved the VEBA. Both labor and management in this industry and others have faced significant challenges over legacy pension and health‐care benefits for retirees (Lowenstein 2008). The VEBA involved taking the retiree health benefit costs off the company books and a $13.6 billion financing arrangement (involving cash and equity) in which the union would take on responsibility for hiring the management team to administer these retiree health benefits from now on.

“The VEBA was historical,” said Mulloy, “for the Ford Motor Company and in the industry. First of all, it placed retirees in a much better position going forward. As well, the VEBA places us in a much more competitive position so that we can invest in product within the United States. In my view, it was win–win” (UAW‐Ford Presentation 2008a).

Wendy Fields‐Jacobs echoed a corresponding view on the part of the UAW. “Our first goal was protecting retirees,” she said. “The best way to do this turned out to be through the VEBA. . . . But it was not just finding the right agreement, but also explaining it to all of our members. This is a major departure from what is traditional” (UAW‐Ford Presentation 2008a).

In the 2008 panel presentation following the negotiations, Bob King concluded:

While GM was in the lead on the negotiations and thus helped produce the initial language on the VEBA, many of the ideas that were incorporated into those negotiations were brought by the UAW based on what they had learned from the brainstorming over the summer in the UAW–Ford negotiations. Moreover, as we will see, subsequent modifications in the VEBA were first negotiated by the UAW with Ford, building on the foundation of mutual understanding established through the interest‐based process.

The VEBA was immediately highlighted by the media as an important breakthrough. But the agreements on what the parties termed an “entry wage” were initially interpreted by critics and some in the media as a two‐tier wage package (Terlep and Vlasic 2007). In fact, two‐tier wage systems negotiated in the 1980s and 1990s had proven unstable once a majority of the workforce came under the lower wage tier (Walton, Cutcher‐Gershenfeld, and McKersie 1994) and thus had fallen out of wide use. In the 2007 auto negotiations, the parties constructed an arrangement that involved a lower starting wage for certain new workers but still gave them opportunities to move up into the full wage and benefit package. The result is a continued ability to attract new workers, a lowering of the average wage cost across the workforce, a mechanism to increase union membership, and a preservation of good jobs (even if it takes longer to achieve the full set of wages and benefits).

Importantly, the entry wage arrangement established by GM (and then adopted by Chrysler) was different in some respects from what had been developed by the UAW–Ford subcommittee. The UAW–GM and UAW–Chrysler language was a fixed formula, while the UAW–Ford subcommittee had developed a more flexible arrangement that enabled both parties to better utilize the entry wage to improve the competitive situation of the plant and to bring in new investment and new work.

Bill Dirksen credits interest‐based bargaining for the flexibility of Ford's entry‐level agreement. This wage and benefit structure “offered a more cost‐dependent entry labor rate and an opportunity to go into a higher rate of pay over time,” he said.

The entry wage represents a break from the pattern bargaining model — even if the issue was the same at Ford as it had been at GM, the UAW–Ford approach drew on the interest‐based problem‐solving dialogue and was more fully matched to the interests of both parties. Subsequently, both the UAW–GM and the UAW–Chrysler negotiators revisited this issue and made some adjustments for implementation that incorporated ideas that came out of the UAW–Ford negotiations. Given the general reluctance of negotiators to revisit agreements once settled and the historic forces of pattern bargaining, this adjustment by the other auto negotiators represents important evidence that the UAW–Ford process produced more of a mutual gains approach. To the extent that future negotiations with all three employers will utilize more of a problem‐solving approach, increased variation and innovation will have to be incorporated into the industry model of pattern bargaining.

For the UAW, the entry wage agreement was part of a larger shift toward deeper influence in business decisions. “It was about securing a greater voice in the business,” said Fields‐Jacobs of the UAW, “not just having a voice in bargaining, with more transparency and understanding — but finding ways so that our members locally (the local president, chairpersons, and others), could have a voice on the business that's ongoing.”

“We had to ensure their greater understanding of what happens in their four walls,” she continued, “how that impacts on what vehicles are produced in their plants, and what happens going forward. It can't be that they are just walking away from the table after bargaining, but that they have an ongoing voice” (UAW‐Ford Presentation 2008a).

Additional elements of the agreement built on the specific plant‐by‐plant competitive operating agreements, with agreements on sourcing decisions and product placements. This included commitments from Ford to build five new flexible body shops in UAW–Ford assembly plants and specific investments in new technology in stamping and power train operations. Moreover, certain Ford manufacturing facilities that were previously identified for closure by the company were able to remain open.

Since the 2007 negotiations more than 1,700 new jobs have been insourced at a time of deep instability in the industry. This job growth can be directly attributed to the entry wage and the contractual flexibility. More than $750 million in new investment was associated with these new jobs, which involve a broad range of specific business decisions, such as implementing a work area to “kit” production components from suppliers that then facilitates assembly or bringing production work previously in Mexico or other nations back to locations in the United States.

Quality was highlighted as a key 2003 subcommittee that served as a precursor to the 2007 negotiations. The results of the bargaining on quality in 2007 represented a range of specific understandings meant to sustain and deepen the impact on joint quality, including the establishment of a certified quality specialist training program, the development and utilization of hourly workers trained as six sigma black belt change leaders, a joint commitment to continuous improvement in Ford's customer service division, and integrated continuous improvement forums that link joint efforts in quality, operating efficiency, employee empowerment, and job security. Other aspects of the agreement addressed many traditional bargaining topics, including wages, settlement bonuses, health and safety, training, skilled trades, and holidays.

Looking ahead, both the company and the union knew that there would need to be reductions in the number of hourly and salaried employees (also known as headcount). The approach they took echoed the approach taken in the early 1980s when there were massive reductions, but successful efforts were made to help people land on their feet by offering them, in the words of Mulloy, “an array of buy‐out packages second to none.” Features of these voluntary packages included a $100,000 lump sum buy‐out option and a generous tuition reimbursement program (four years at $15,000 per year plus half salary, and four years of health‐care coverage). Said Mulloy, “I don't think any employer in the United States offers something that generous. But it was important to us that we offer packages to our employees when they separate so they separate with skills to go out and get another job. . . . At the end of the day, we want to give people options. We give them attractive options and we've been able to lower our headcount to where we need to be” (UAW‐Ford Presentation 2008a).

Reflecting on the process and the results, Chuck Browning of the UAW said, “I hope that, as people look back on what we did at this time, they will conclude that we helped save the domestic automakers here in the U.S.” (UAW‐Ford Presentation 2008a).

The contract was ratified by more than 80 percent of the UAW–Ford workforce, reflecting both the knowledge of the competitive context by the membership and the degree to which this was seen as an acceptable response to the competitive pressures.

An important element of the process established in the “bargaining over how to bargain” phase involved an agreement to anticipate implementation during the negotiations. Ford union labor relations manager Jack Halverson explained:

One key tool that was provided to help with implementation involved placing the negotiated agreements into a format termed the “Five Ws & How,” which specify the what, why, who, when, where, and how for implementation. The various implementation tools were all part of a model for “Joint Implementation and Alignment” that had been developed and utilized in joint quality and continuous improvement efforts beginning in the early 2000s.⁶ This model, which is presented in Figure One, involves taking a standardized and structured approach to implementation.

This model suggests that the negotiated agreements on each issue are not ready for implementation until both parties share a vision of success, have a strategic plan (with timing milestones, a stakeholder map, etc.), and put resources in place for joint (rather than unilateral) implementation (steps 1.0–3.0 of the model). The model also includes identification of “systems context” factors that need to be taken into account as part of any large‐scale systems change initiative. In fact, the use of the model by the parties varied across the issues. In some cases, there was a systematic plan developed before the conclusion of negotiations. In other cases, the plans were fleshed out over the six months following ratification of the agreement. Systems context issues were taken into account where appropriate, but the primary advance here was the priority placed on a shared vision, a strategic plan, and joint implementation of the negotiated agreements.

Traditionally, within management, implementation would be coordinated with a tracking matrix under which labor affairs staff would each be assigned leadership responsibility for different issues. This approach was still followed, but the information on the tracking matrix was now shared on a joint basis with the union. Within the union, international staff continued to have lead responsibilities for implementation, as was historically the case, but a greater proportion of local union leaders were given implementation responsibilities.

By having implementation dialogue during the negotiations, the parties explored various “what if” scenarios. In the process, additional insights surfaced that led to agreements that were more robust. “As we were bargaining and exploring potential solutions, we talked about how we would be able to implement these solutions,” said Jack Halverson of Ford. “Sometimes we talked about what we thought might have been a good agreement, but we couldn't come up with a method that would be workable for implementation. And the best agreement in the whole world isn't worth anything if it either doesn't get or can't be implemented.”

“Coming out of negotiations, there are probably more changes with this agreement than I've seen in any of the agreements in my history with Ford. And there are many, many provisions that need to be implemented,” he continued. “Implementation is on ongoing process. It requires constant communications. It requires checking and adjusting your plan when you're not getting the results that you're expecting” (UAW‐Ford Presentation 2008a).

It can be difficult to focus on implementation during bargaining, particularly when aspects of the agreement involved strong feelings and hard bargaining. But the experiences of the UAW and Ford suggest that discussing implementation before the agreement is concluded has important advantages. Ultimately, when key aspects of the agreements were being implemented subsequent to the negotiations, the likelihood was much higher that front‐line workers heard the same messages from their supervisors and their union representatives, that years later there would not be pointed fingers over aspects of the agreement not implemented, and that tangible results would be achieved.

Following the 2007 negotiations, the parties have faced more challenging economic circumstances than either anticipated. The result has been increased tension as both parties work to honor the agreements reached and still respond to major shifts in demand associated with a recessionary economy and unprecedented high fuel prices. When financial markets collapsed, the UAW joined GM and Chrysler in approaching the federal government for massive loans sufficient to weather the crisis (as Chrysler had done during the 1980 crisis). Ford had previously secured a line of credit that enabled them to proceed without federal loans. Still, Ford was supportive of the government support to GM and Chrysler because all three automakers shared a common base of suppliers that was also on the verge of collapse. Following the government “bailout” of GM and Chrysler, there have been two modifications of the 2007 contracts, each of which is best understood with reference to the 2007 negotiations.

The first modification was initially planned to involve GM or Chrysler negotiators, with direction by the U.S. government seeking additional concessions from the UAW. Aware of the experience with the interest‐based approach in the UAW–Ford negotiations and concerned that the government might take a more blunt approach, the UAW reached an agreement with Ford in March 2009 that modified a number of economic elements of the collective bargaining agreement and allowed the company to fund the VEBA with either cash or equity. The agreement was ratified by more than 58 percent of the membership and became the pattern that was brought to the GM and Chrysler modification negotiations. This was a use of the traditional pattern bargaining method by the UAW, but now with the government connected to management as the recipients of the pattern.

Six months later, in October 2009, the UAW was again in modification negotiations with Ford, following the bankruptcies of GM and Chrysler. This time, the negotiations with Ford centered around a small number of additional issues that were included in the GM/Chrysler settlements that had not been a part of the Ford agreement in March. The mood among the UAW–Ford workforce did not favor any further concessions. At the time, Ford had achieved industry leadership in quality, was gaining market share, and had rewarded its CEO with additional stock benefits (although there were no other executive bonuses in the 2008 and 2009 performance periods). Even though the second modification agreement did include some additional product placement assurances as a result of problem‐solving dialogue, it was voted down by more than 70 percent of the membership. The company had announced in October 2009 a return to profitability for its third quarter, which was the first operating profit since the beginning of 2008. The tensions around the business improving at the same time that additional sacrifice was being sought from the workforce was too great to overcome — even if GM and Chrysler did have a competitive advantage as a result of the government bailout and the concessions imposed there.

Following the vote, Bob King was quoted in a UAW press release as stating: “The ratification process proves once again that the membership is the highest authority in our union and we are respectful of the final outcome.” Joe Hinrichs was quoted as stating: “Ford is disappointed that the additional changes were not ratified. The additional modifications we sought recently were designed to honor pattern bargaining and provide Ford with similar additional efficiencies as those ratified this year for our domestic competitors” (McCausland 2009). This has added new tensions to the relationship, though the joint implementation on quality, safety, and other matters continues for the UAW and Ford.

Today, Ford's decision not to seek government support has earned it a competitive advantage in the marketplace, although it is also competing with companies that have shed hundreds of millions of dollars of debt during bankruptcy. In this mix, the UAW–Ford relationship will continue to be instrumental to the future of the company. During the summer of 2010, Bob King was elected president of the UAW international union and all parties are preparing for the 2011 negotiations when the future of the industry will, in all likelihood, be back on the table.

Thus, in the years since the conclusion of the 2007 negotiations, the interest‐based approach first played a strategic role in maintaining pattern bargaining in the industry (when the UAW leveraged the Ford relationship to set a pattern for the industry's modifications). Then the economic dynamics swamped the bargaining process in a second round of Ford modifications when additions to the pattern at GM and Chrysler were rejected by the Ford workforce.

For the UAW and Ford, the 2007 auto negotiations were pivotal. The future viability of both the company and the union were at stake. For the company, a continuation of the past economic packages would have placed it on the verge of bankruptcy — something that was quite likely given the subsequent economic downturn. For the union, the loss of more than half its members and the rise of the nonunion sector of the auto industry were forcing hard internal staff reductions and fundamental questions around a representational strategy that would simultaneously enable industry viability and maintain the union's independent voice.

In this context, the UAW–Ford negotiations provide a number of generalizable lessons. These lessons are directly applicable to labor negotiations and have implications for negotiations in other settings.

First, the company adopted a stance of complete transparency on its economic situation and the union responded by fully and responsibly engaging the data. The economic expert brought in by the union, Eric Perkins, earned credibility with both sides and the results of the analysis were shared broadly with local union leaders. Importantly, the focus was on understanding both the finances of the company as a whole and the competitive posture of individual plants. Thus, at all levels, both parties began bargaining with common economic information. The transparency was enabled both by management's trust that the union would handle the information in a constructive way and by the union's commitment to honor that trust at all levels. Plenty of forces could have pulled both sides away from trust — the perceived broken promises from management and various internal dynamics in the union — but each side chose to build on the positive potential in the relationship. This combination of increased transparency and leadership choices emphasizing trust stand as central lessons for any negotiation that aspires to be transformational.

Second, based on the economic analysis, the parties launched an early round of local negotiations to establish COAs, through which the parties achieved an estimated half billion dollars in savings even before they began national negotiations. This reduced the severity of the concessionary pressures going into national negotiations and served to educate parties at all levels about the particular business case in each location. Not all negotiations feature both local and national levels of bargaining, but where there are two or more levels in a system, applying a transformational approach in a coordinated fashion at multiple levels is key.

Third, the parties entered into a formal “bargaining over how to bargain” process in which they adapted the past bargaining traditions to match the current realities. This built on earlier successes with the joint quality initiatives. The result was a major shift from a predominantly adversarial process to one emphasizing joint problem solving. It was also a process that was designed to be robust across twenty‐four subcommittees and main table bargaining. The concept of “bargaining over how to bargain” often takes place on an informal level, but elevating it to a formal element of the process served to better align all the negotiators with the goal of matching the bargaining process to the nature of the issues to be negotiated.

Fourth, manufacturing managers played key roles at the plant and national levels, which was a significant departure from the way labor relations professionals usually conducted negotiations on the management side. This built on a recent history of close manufacturing manager and HR manager involvement in the accelerated introduction of team‐based work systems and lean/six sigma principles. It provided the union with increased confidence that manufacturing management would follow through during implementation, and it provided management with the ability to focus on agreements that would be most valuable to the operations. The generalizable implication is that the relaxing of HR's role as an agent — in effect representing manufacturing management — and instead having this additional stakeholder at the table, enabled a further‐reaching process and outcome.

Fifth, breakthrough agreements were achieved that took into account the mutual interests of the parties. Coming out of negotiations, the company was better positioned to compete in a challenging context and the union had a path through which it could maintain and potentially grow membership based on a competitive business model. This served to complement the negotiations taking place with the “target” company (GM) rather than to diminish the negotiations. In other words, the union was still able to benefit from the leverage of having a target company, without sacrificing the potential for other negotiations to generate valuable innovations. This extends the idea of pattern bargaining to encompass both the value of a pattern and the value of separate innovation.

Sixth, dialogue on how to implement and sustain the agreements took place during the negotiations. While it is hard to build dialogue on implementation into negotiations and the experience was not as consistent as desired across all issues, the formal process for attending to implementation represents an important bargaining innovation.

Finally, the 2007 negotiations featured various breaks with the tradition of pattern bargaining that raise fundamental questions for future auto negotiations. In this case, business‐specific problem solving generated more customized agreements. As well, variations in the degree of transparency and trust set the relationships on different trajectories that affected the subsequent “modification” negotiations. It remains to be seen if greater harmonization in processes and relationships will enable a new form of pattern bargaining to emerge in the industry or if the future will bring increased variation. . . . increased variation — a core challenge for the institution of collective bargaining (Cutcher‐Gershenfeld and Kochan 2004).

Overall, this case study highlights key process innovations by the UAW and Ford that were instrumental in navigating the economic crisis facing the industry and that continue to be a foundation for world‐class quality results and constructive labor–management relations at all levels. At GM and Chrysler there were also quality and other process improvement initiatives that preceded the crisis in the industry and that will be essential to their respective fortunes in the marketplace. Some aspects of labor–management relations at both GM and Chrysler are constructive, including aspects of problem‐solving dialogue during the 2007 negotiations. In this case, however, the transformation of the bargaining process by the UAW and Ford is the benchmark that is highlighted here so that it can be assessed for its broader applicability in the industry and beyond.