A personal experience with union negotiations in Mexico
My mouth is dry and my palms were sweating. It is January of 1999 and I am in central Mexico and about to face my second union contract negotiation and this time without head office support. The days are sunny and dry and the nights are cool but my nervousness has more to do with the previous year's negotiation than with the weather. I had just arrived in Mexico in October and the contract expired the first week of January. Our manufacturing operation in Mexico was in trouble and we had to make a lot of changes quickly to rescue the business. This was my assignment as Vice President and General Manager. Our union local belongs to the very powerful Confederation of Mexican Workers (Confederación de Trabajadores Mexicanos or CTM) and some of the changes we made had not been well accepted by the workers in the local. The negotiation at the beginning of 1998 was very confrontational and went right to the wire. The state governor's office was brought in at the last minute to help get a settlement, barely avoiding the strike deadline.
I decided that - after that week of hell - I did not want to go through it again nor did I want to take a chance on shutting down any of our customer's operations. I set up weekly meetings with the shop stewards and we worked through a lot of their concerns in a proactive manner. During the first meetings, there was a lot of mistrust on the part of the workers but gradually they started to see their concerns being addressed. We made it a policy that nothing that would change the intent of the current contract could be discussed but, other than this, the topics were wide open. By the end of the year, the stewards were making very good suggestions on operations that had very good results. The representative from the union's office in the state capital who assisted the workers attended the meetings once a month. He was very impressed with the relationship that we established and that the workers had a voice in the operation of the business.
Now, back to 1999. Sitting at the far end of the table was the company's Mexican labour lawyer. A smooth character, he was very knowledgeable in labour law and negotiating tactics. He was my right hand in the negotiation and he acted very much like a mediator in finding common ground. Around the table were the five shop stewards and the union area representative. The stewards were mostly younger workers, and three of them were very militant. The previous year's negotiation had been on wages only, but this year it was for both wages and benefits. This alternating format is a common practise in Mexico.
The union's first demand amounted to a 50% increase in both wages and benefits. We quickly agreed that this was unrealistic and would force the company to close the business and move the production to another country. We kept the union coming back to us with different offers through the first day, with a break at mid-day for pizza. I presented a lot of data on the morning of the second day, including cost of living increases in the region and recent settlements of other contracts. We all agreed that the benefits should remain the same with just minor changes, but that overall our benefits were very competitive for the area. We had three wage categories in the plant, and the negotiation came down to one of wage increases and promotions. The union stewards were all in the top two categories. I kept a spreadsheet that showed the percentage increase for the workers in each category as well as the increase for workers who would also get promotions. I had a hidden portion of the spreadsheet that also showed the overall effect on the labour portion of my budget and the bottom line impact. The labour lawyer and I both kept stressing the good relationship we had with the union, and we made sure that the negotiation progressed in the same manner that our weekly meetings had. We were a team meeting to work on solving problems and there wasn't any confrontation, only mutual respect for our relative positions.
By the end of the second day, we had an agreement that gave the stewards a little extra boost. Workers with the most seniority were treated well, and those in the lowest category (which was 60% of the employees) ended up with less than the current cost of living increase. Our wage package remained competitive in the area and we never had a problem in attracting new employees. This strategy worked for us over the next five years and, because of turnover, we finished every year under budget for our labour costs.
We all met in the capital the next day to sign the contract and had a nice lunch afterwards. Each year after this, the negotiation became easier and in my last year in Mexico, we were done in four hours. Every year the union requested that we meet every day for a few hours even after we reached an agreement so that workers would see that they were bargaining very hard on their behalf. The relationship and our weekly meetings continued even though the stewards changed over time. I had a total reorganization of the company structure to deal with a few years later, and the strong relationship with the union made it a non-event. Best of all, I could face the first weeks of January without the sweaty hands and dry mouth that characterized that first event.