99 CASE: The Give Back: A Case of Union Busting Three years ago, Local 974 of the United Tireworkers of America made significant contract concessions to the North American Tire plant in Bailey, Georgia. The union concessions were made for the company’s economic survival and for the plant to remain open. Now, as the U.S. economy was struggling to recover from what some had called the worst recession since the Great Depression, North American Tire and its union was back at the bargaining table. While the U.S. economy had shown some signs of recovery, the union was not looking to give back again but to recover some of what was given up in previous negotiations. The union’s position was that its previous concessions had facilitated North American Tire’s survival and that it had already done its part to ensure the company’s viability. However, the company had other goals for negotiations. The company’s initial proposals did not satisfy the union’s negotiating team, a strike resulted, and both sides indicated their resolve was strong. While picket lines and demonstrations at the plant were rather uneventful, a war of words was fought in the media. On the one hand, full-page ads appeared in the local papers condemning the company for going back on their word to make up for the givebacks of the past. On the other hand, the company claimed it needed to maintain its competitive position in an industry undergoing a shakeout of underperforming competitors. North American Tire’s parent company, Swiss Financial, of Alpsland, Switzerland, reported that operating profit rose 20 percent to $68 million on sales of $1.1 billion in the most recent quarter. North American’s other nonunion plants were operating at capacity, and the company recently announced the purchase of Mexico’s largest tire maker. Negotiations broke down when the union rejected what management called its best offer. The company stated that the contract proposal was well above average for the Bailey, Georgia area. However, the union countered that it was well below industry standards. In addition, the union filed unfair labor practice charges with the National Labor Relations Board (NLRB). The union alleged that the strike was caused by unfair labor practices including the company’s refusal to bargain over medical insurance or to bring its decision makers to the bargaining table. Supervisors and clerical employees kept the North American Tire plant in Bailey operating at less than 30 percent of capacity, and plans were made by management to hire strike replacements. Striking employees were invited to return to work, but only a small percentage returned. The company began to advertise, interview, and hire strike replacements. Although the labor market was tight and Bailey’s unemployment rate was less than 3 percent, there was no shortage of applicants. The company increased production at the Bailey plant, and production was also stepped up at its nonunion plants. While the union cried foul, the.

1. 99 CASE: The Give Back: A Case of Union Busting
Three years ago, Local 974 of the United Tireworkers of
America made significant contract concessions to the North
American Tire plant in Bailey, Georgia. The union concessions
were made for the company’s economic survival and for the
plant to remain open. Now, as the U.S. economy was struggling
to recover from what some had called the worst recession since
the Great Depression, North American Tire and its union was
back at the bargaining table. While the U.S. economy had
shown some signs of recovery, the union was not looking to
give back again but to recover some of what was given up in
previous negotiations. The union’s position was that its
previous concessions had facilitated North American Tire’s
survival and that it had already done its part to ensure the
company’s viability. However, the company had other goals for
negotiations.
The company’s initial proposals did not satisfy the union’s
negotiating team, a strike resulted, and both sides indicated
their resolve was strong. While picket lines and demonstrations
at the plant were rather uneventful, a war of words was fought
in the media. On the one hand, full-page ads appeared in the
local papers condemning the company for going back on their
word to make up for the givebacks of the past. On the other
hand, the company claimed it needed to maintain its competitive
position in an industry undergoing a shakeout of
underperforming competitors. North American Tire’s parent
company, Swiss Financial, of Alpsland, Switzerland, reported
that operating profit rose 20 percent to $68 million on sales of
$1.1 billion in the most recent quarter. North American’s other
nonunion plants were operating at capacity, and the company
recently announced the purchase of Mexico’s largest tire maker.
Negotiations broke down when the union rejected what
management called its best offer. The company stated that the
contract proposal was well above average for the Bailey,
Georgia area. However, the union countered that it was well

2. below industry standards. In addition, the union filed unfair
labor practice charges with the National Labor Relations Board
(NLRB). The union alleged that the strike was caused by unfair
labor practices including the company’s refusal to bargain over
medical insurance or to bring its decision makers to the
bargaining table.
Supervisors and clerical employees kept the North American
Tire plant in Bailey operating at less than 30 percent of
capacity, and plans were made by management to hire strike
replacements. Striking employees were invited to return to
work, but only a small percentage returned. The company began
to advertise, interview, and hire strike replacements. Although
the labor market was tight and Bailey’s unemployment rate was
less than 3 percent, there was no shortage of applicants. The
company increased production at the Bailey plant, and
production was also stepped up at its nonunion plants. While the
union cried foul, the company continued to increase production.
A federal mediator was appointed to get both sides back to the
bargaining table to resume negotiations.QUESTIONS
1.
What are the pros and cons of North American Tire’s strategy of
hiring replacement workers? How ethical is the behavior of
management?
2.
Assuming that the firm’s goal is to break Local 974 of United
Tireworkers of America, what are the advantages and
disadvantages of this strategy?
3.
What standard should the firm use in setting wage rates
(industry or geographic)?
Contributed by Gerald E. Calvasina, Southern Utah University
and Joyce M. Beggs, University of North Carolina at Charlotte
65 CASE: The Overpaid Bank Tellers
State Bank is located in a southwestern town of about 50,000

3. people. It is one of four banks in the area and has the reputation
of being the most progressive. Russell Duncan has been the
president of the bank for 15 years. Before coming to State Bank,
he worked for a large Detroit bank for ten years. Duncan has
implemented a number of changes that have earned him a great
deal of respect and admiration from bank employees and
townspeople alike. For example, in response to a growing
number of Spanish-speaking people in the area, he hired Latinos
and placed them in critical bank positions. He organized and
staffed the city’s only agricultural loan center to meet the needs
of the area’s farmers. In addition, he established the state’s first
“uniline” system for handling customers waiting in line for a
teller.
Perhaps more than anything else, Duncan is known for
establishing progressive human resource practices. He strongly
believes that the bank’s employees are its most important asset
and continually searches for ways to increase both employee
satisfaction and productivity. He feels that all employees should
strive to continually improve their skills and abilities and,
hence, he cross-trains employees and sends many of them to
courses and conferences sponsored by banking groups such as
the American Institute of Banking.
With regard to employee compensation, Duncan firmly believes
that employees should be paid according to their contribution to
organizational success. Ten years ago, he implemented a
results-based pay system under which employees could earn
raises from 0 to 8 percent each year, depending on their job
performance. Raises are typically determined by the bank’s HR
committee during February and are granted to employees on
March 1 of each year. Six years ago, in addition to granting
employees merit raises, the bank also began giving cost-of-
living raises. Duncan had been originally opposed to this idea
but could determine no alternative.
One February, another bank in town conducted a wage survey to
determine the average compensation of bank employees in the
city. The management of State Bank received a copy of the

4. wage survey and was surprised to learn that its 23 tellers, as a
group, were being paid an average of $22 per week more than
were tellers at other banks. The survey also showed that
employees holding other positions in the bank (e.g., branch
managers, loan officers, and file clerks) were being paid wages
similar to those paid by other banks (see Exhibit 4.1).
After receiving the report, the HR committee of the bank met to
determine what should be done regarding the tellers’ raises. The
committee knew that none of the tellers had been told how much
their raises would be, but that they were all expecting both
merit and cost-of-living raises. They also realized that, if other
employees learned that the tellers were being overpaid, friction
could develop and morale might suffer. The committee knew
that it was costing the bank over $26,000 annually to pay the
tellers. Finally, they knew that as a group the bank’s tellers
were highly competent, and they did not want to lose any of
them.QUESTIONS
1.
If you were on the HR committee of State Bank, what decisions
would you suggest regarding raises for the tellers?
2.
How much faith should the HR committee place in the accuracy
of the wage survey?
3.
Critique State Bank’s policy of giving merit raises that range
from 0 to 8 percent, depending on job performance.
4.
Critique the bank’s policy of giving cost-of-living raises. Do
you think that they should be eliminated?