Good Quality Auto Parts Limited (GQ) is a medium-sized, privately owned producer of auto parts, which are sold to car manufacturers, repair shops, and retail outlets. In March Year 10, the union negotiated a new three-year contract with the company for the 200 shop-floor employees. At the time, GQ was in financial difficulty and management felt unable to meet the contract demands of the union. Management also believed that a strike of any length would force the company into bankruptcy. The company proposed that in exchange for wage concessions, the company would implement a profit-sharing plan whereby the shop floor employees would receive 10% of the company’s annual after-tax profit as a bonus in each year of the contract. Although the union generally finds this type of contract undesirable, it believed that insisting on the prevailing industry settlement would jeopardize GQ’s survival. As a result, the contract terms were accepted.
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