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The typically view of labor-management relations is that interactions




Give and Take;Case Summary;The typically view of labor-management relations is that interactions are heated. However, many;unions and management teams work together effectively. One example is Harley-Davidson;which had to recently reduce costs in its York factory because of recessionary pressures. The;plant was antiquated, labor costs were high, and there was inflexibility in employee movement;across many different job classifications. Instead of simply closing the plant, Harley was;encouraged to renegotiate with the union workers.;The terms of the new agreement, approximately half of the jobs in the plant were cut, and the;number of job classifications was cut from 60 to five. Newly hired employees would also start at;lower wages than the current workers, and some of the workers who had retained their jobs;would take pay cuts. Further, Harley and the state of Pennsylvania agreed to update the York;plant, and the factory would be the first to staff new jobs when the economy recovers. Some;experts believe that this deal was too one-sided in favor of Harleys interests.;Give and Take;The general view of management and labor union is that they are antagonist: when one wins;the other loses and vice versa. In reality, of course they are many situations where businesses;and unions coexist quite peacefully. And there are other situations where businesses and unions;find they have little choice but to work together in order for both to survive. During the economic;recession of 2009, for example, unions agreed to help out the businesses that employed their;members in several cases.;One notable example came from Harley- Davidson, the big motorcycle manufacturer.;One of Harleys biggest factories is in York, Pennsylvania. The York plant, one of Harleys;oldest, employed about 2,000 nonmanagerial workers. The recession caused a dramatic drop in;revenue for Hurley and the firm desperately needed to cut costs. Company officials determined;that Harley needed to reduce its over-all cost by 120 million to 150 million to remain competitive.;The York factory was a key site for cost reduction. For one thing, the factory was in dire;need of modernization. For another, the labor contract governing York workers called for wages;well above the industry average, moreover, the factory had more than 60 different job;classifications, and the union contract made it nearly impossible to move workers across;classifications.;One of the first options Harley considered was simply closing the York plant and moving;its jobs to the firms newest factory in Kentucky. That plant had a more flexible union contract;and the newest technology. The international Association of Machinists and Aerospace Workers;however, persuaded the company to negotiate a new arrangement that would allow some of the;unions workers to retain their jobs.;Under terms of the new agreement, which took effect in February 2010, about half of the;plants 2000 jobs would be eliminated. The number of job classification would also be cut from;60 to five, and Harley would have considerable flexibility to move workers from one to another.;Moreover, any new employees hired after February 2010 would start at an hourly rate of $;19.28, about 20 percent less than the previous starting rate of $ 24.10. Finally, the 1000 or so;workers who retained their jobs would be divided into two groups. About 750 first-tier production;workers would retain their full time jobs with current wages and benefits. The other 250 or so;would be classified as casual workers, these workers would take a wage cut about 30 percent;and would only work on an as-needed basis.;For its part, Harley agreed to invest $ 90 million to modernize the plant with the goal of;allowing the York factory to be the first one to create new jobs when demand for motorcycles;begins to increase. The State of Pennsylvania also agreed to chip in $ 15 million to support both;plant upgrades and new training programs for workers. Finally, Harley also agreed that the 750;first-tier production workers would have their jobs guaranteed for the duration of the 7 year deal.;Many observers saw this new contract as one-sided in favor of Hurley Davidson. One;expert, Professor Gary Chaison at Clark University, commented, This is tying the hands of the;Union for a long time. In contrast to similar renegotiations, the union does appear to have given;up a lot. For instance, the UAW renegotiated its labor contract with General Motors during the;automakers recent financial problems. Under terms of the new agreement, GM would be;allowed to eliminate one-third of its job and reduce its retiree health-care obligations by funding;a portion of its obligations with stock rather than cash. In exchange, the UAW received job;guarantees for two-thirds of the GM workforce, a large equity stake in GM, and a seat on GMs;board of directors.;Answer;1. Do you think the Harley deal was too one-sided? Why or why not?;2. If you were a Harley or GM employee and union member, would you have voted for the;new deal? Why or why not?;3. Do you think it is appropriate for a government entity (such as the state of Pennsylvania);to take an active role in union-management negotiations? Why or why not?;This another article can help.;MILWAUKEE Some motorcycle enthusiasts feared Keith Wandell might be the outsider who;drove Harley-Davidson into the ground. Instead, he may be remembered as the guy who kept;the motorcycle maker on the road.;Wandell grabbed the handlebars at the motorcycle maker in the heart of the economic crisis in;2009. Harley lost $55 million that year, as buying a motorcycle stopped being an option for;many consumers.;We had to make, quickly, some big, bold, decisions, he said in a recent interview.;Wandell was the first CEO from outside Harley, so those decisions were watched closely. Not all;were well-received. He got the unions approval to use temporary workers, which enabled;Harley to time its production closer to the peak bike-buying season, saving time and money. He;relied less on middle-aged men in the U.S. to buy the bikes. And he focused the company on;doing what many say it does best: making big, powerful, premium-priced Harleys. But that;meant getting rid of some popular secondary brands.;The company made $624 million last year, the best annual profit since 2008. It also boosted;profit by 30 percent in this years first quarter, compared to the same period in 2012. With lower;costs and more efficient production, analysts say Harley is in a good position to grow as the;global economy improves and in better shape to weather any future downturn.;Weve just got an awesome future, Wandell summed up in a recent interview.;Its a far cry from when he started. The recession and credit crisis sent shockwaves through;Harley, a company that had done so well for so long that there was little incentive to innovate. In;the early 2000s, many dealerships had waiting lists of buyers, and sales and profit grew year;after year. Then, in one year, bike shipments dropped about 25 percent and the company laid;off hundreds of workers.;The rapid change left employees stunned, and the introduction of Wandell, who didnt even own;a motorcycle at the time, was another blow.;You can just imagine. This was like, for the company, everything was upside down, said the;63-year-old Wandell, who came from car battery and building ventilation systems maker;Johnson Controls Inc., also based in Milwaukee. I mean, how can they bring in somebody from;the outside? What the hell is going on? The economys in the tank. Sales are down. Its this;that. People were just churning.;Harley had many of the same problems as the Detroit automakers: a big union labor force, old;manufacturing processes and strong competition from Japanese companies with cheaper;models on the market. It also had one additional, major disadvantage.;A luxury motorcycle, for most people, isnt necessarily a commuting tool, said Rommel;Dionisio, an industry analyst and senior vice president of equity research at Wedbush.;Under Wandells direction, Harley angered many riders when it pruned popular divisions. Fans;of Buell racing bikes were as avid as Harley enthusiasts, and many were offended when the;company closed the division. Harley surprised others by selling Italian premium sport-bike;maker MV Agusta just a year after buying it for $109 million.;Wandell, who now owns four Harley bikes, stands by his decision. We only had a fixed budget;for product development, and we were spending it on three brands, he said.;Harley modernized its operations in York, Pa., and renegotiated key union contracts so that it;could use temporary workers to ramp up production quickly as it heads into the summer, when;bike-buying peaks. In the past, the company estimated eight or nine months out what customers;would want. If it was wrong, dealers had to trade bikes with each other to fill orders, costing;them and Harley money. Now, Harley has to look ahead only a few months, making its;predictions more accurate.;Harley needed to make the right bikes at the right time and get them to the right place;Wandell said.;The company is in the midst of a similar but smaller transformation of its Kansas City, Mo.;plant. By the end of this year, it will have spent $490 million to modernize, an investment it;expects to save it $320 million a year in manufacturing costs.;As a result, profits are now rebounding faster than bike sales, said Bill Selesky, an industry;analyst for Argus Research.;It comes down to one thing... They can produce a bike as good, if not better, at a cheaper;cost, Selesky said.;Jim Waltermyer, the local union president in York, said the overhaul was difficult for long-time;workers. They saw friends and co-workers get laid off or retire, and had to learn new ways of;doing their jobs. Many felt that they had no choice, and the poor economy made it an ideal time;for Harley to make changes, he said.;People wanted to make sure they kept their jobs, Waltermyer said. With sales back up, many;are hoping for more stability and security, he said.;Greg Schreck, director of the Harley Owners Groups 400-member Milwaukee chapter, said;some riders may have been skeptical when the company put a non-rider in charge. But Wandell;gained credibility by showing up at bike night at the Harley museum and taking a ride to;Sturgis, S.D., where hundreds of thousands of motorcyclists gather each year. Schreck said;when he sees Harleys stock price climb higher, it just reaffirms the confidence in the brand.;Harleys stock hit a nearly six-year high on May 19 when it closed at $59.48. Since the market;bottomed on March 9, 2009, Harleys stock has gone up six-fold, while the Standard & Poors;500 index has more than doubled.;Harley Owners Group, or HOG, has been a major asset in broadening the companys appeal;beyond middle-aged men like Schreck, a 57-year-old transportation consultant.;Crystal Swift, a 53-year-old computer systems engineering team manager who lives in;Charlotte, N.C., said her introduction to Harley came when she and a group of Vespa riders;crashed a HOG party. She bought her first Harley in 2005 and now owns a 2012 Street Glide;and a 2002 Fat Boy that she bought used in December.;With Harley, you are a member of a brotherhood, or a sisterhood, that I cant even imagine;unless you are in the military, Swift said. It isnt just that its a much better made machine. It;comes with the lifestyle.;Harley makes big bikes those with engines at least 600 cubic centimeters. It has a 56 percent;market share in that category, Dionisio said. Its also the top seller in every subcategory;young riders, women and minorities, and its market share has been growing since Wandell took;over. For example, Harleys market share among women grew to 62 percent last year from 50;percent in 2008, according to company data. With young adults, its market share grew to 46;percent from 32 percent in the same period. Among African-Americans, it grew to 51 percent;from 38 percent.;But continued growth is a challenge.;Harley bikes tend to cost more than other brands, an obstacle for some shoppers. Jason;Buettner, a 34-year-old information technology worker from Sugar Land, Texas, said he took a;riding class at a Harley dealership before paying about $5,000 for a 2008 Yamaha YZF-R6S last;spring. He said he figured a Harley would cost him $12,000 to $15,000, and he viewed it as a;brand for older guys.;Chief marketing officer Mark-Hans Richer calls that a common misperception, and says the;company has reached out to younger riders. A tongue-in-cheek ad aimed at hipsters notes that;an entry-level, $8,000 Harley costs less than another tattoo, a parking ticket, a gas station;burrito, a lip ring.;Ira Carnahan, an analyst for T. Rowe Price, one of Harleys largest shareholders, said the;company has made a strong turnaround, with sales growth, a lowering of costs and restoring;the companys financing business, which handles bike loans for many Harley buyers. He;credited the companys new management, which includes Chief Financial Officer John Olin and;Chief Operating Officer Matt Levatich, along with Wandell.;All three of these guys have done a tremendous job of taking what was a difficult situation and;really making tremendous progress, Carnahan said.;Several analysts said they believe Harleys greatest potential for growth lies overseas. The;developing economies of Latin American and Asia are particularly promising, they say, since the;first vehicle many people buy in those regions is a motorcycle, not a car.;They are riders, they have disposable income and they recognize the iconic brand, Dionisio;said.;About three-fourths of the 93 new dealerships Harley has opened in the past five years have;been in developing countries. But Wandell said the U.S., with more than 650 dealerships;remains the most important market. Sixty-five percent of the bikes Harley shipped last year went;to domestic dealers.;The company will unveil the first model to come from its new design process at its summer;dealer meeting. Wandell wouldnt give details but said he thought it would show the company;made the right decisions.;View Full Attachment;Additional Requirements;Min Pages: 1;Level of Detail: Only answer needed


Paper#16404 | Written in 18-Jul-2015

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