Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

As the deadline approaches for Fiat and Chrysler to reach a merger agreement, several classic negotiation tactics are in full display.

The U.S. Government’s imposition of an end-of-the-month deadline adds both a sense of urgency and scarcity to the negotiation dynamic – urgency because of the negative consequence of failing to reach agreement (Chrysler’s possible bankruptcy); scarcity because we psychologically tend to want something more when the possibility of getting it declines.

The leverage card is also being played. Fiat’s CEO, Sergio Marchionne has insisted Chrysler’s unions agree to lower labor costs equivalent to those at foreign-owned North American automotive plants and Chrysler’s bondholders agree to forgive a significant part of what they are owed. Fiat’s leverage is strong because if a deal isn’t done, it loses some access to American markets which isn’t nearly as bad for Fiat as bankruptcy would be for Chrysler’s unions and bondholders. If bankruptcy is truly on the table, Fiat has the better Plan B.

Is Marchionne bluffing? Michael Tyndall, a Nomura analyst, recently stated he didn’t think so. However, Chrysler’s unions and bondholders have yet to agree to the requested concessions. Most likely, they are furiously working behind the scenes to improve their alternatives and decrease the possibility of bankruptcy – primarily by lobbying their political allies in Washington, D.C. Would the U.S. government really allow Chrysler to fail? Time will tell…

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