MM5009

DECISION MAKING AND NEGOTIATION

FINAL ASSIGNMENT

Mondelez international and BCTGM International Union Local:

Negotiation on Benefit Plans

INDRIANA SOFIMARWANTI
29115082

YOUNG PROFESSIONAL CLASS YP 53A

MAY 2016
MASTER OF BUSINESS ADMINISTRATION
SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
http://www.sbm.itb.ac.id/mba

MBA SBM-ITB
(MM5009)
Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
A

Name: Indriana sofimarwanti

Decision Making and Negotiation

Take Home Exam
ID: 29115082

Mondelez Global LLC and

BCTGM International Union:
Negotiation on Benefit Plans
EXECUTIVE SUMMARY
Mondelz International and the Bakery, Confectionery, Tobacco Workers and Grain Millers
(BCTGM) union have been negotiating collective bargaining agreements which expired on February
29, 2016, covering about 2,400 represented employees in eight locations.
The Company intends to negotiate in good faith with the goal of securing contracts with the BCTGM
that will continue to provide our employees with good wages and benefits, while at the same time
allowing the Company to operate as a Best-in-Class organization in the Consumer Packaged Goods
markets in which company compete.
In this case, will be presented with theory of negotiation. Mondelez and BCTGM will negotiating
why BCTGM need to have retirement fund plan. The position of BCTGM as a labor that being
respected by the company and the interest of BCTGM wants to get higher benefit price and more
advantageous.
Mondelez side position as the company who would give benefit of their labor but they have to cutting
costs and boost profit. To cut the cost they need to outsourcing the labor. Before that, they need to
layoff some of labor in Oreo, and its a perfect timing that their expiration contract is closer. Mondelez
interest, Its because of the slow growth economy outside America and they cutting expenses by $3
billion and shifting production to lower-cost countries to streamline the business. 1
Mondelez International
Mondelez is a multinational confectionery, food, and beverage conglomerate based in the United
States which employs about 107,000 people around the world. It consists of the global snack and food
brands of the former Kraft Foods Inc after the October 2012 spin-off of its North American grocery
operations. The Mondelez name, adopted in 2012, was suggested by Kraft Foods employees and is a
combination of the words for "world" and "delicious" in Romance languages.
Mondelez manages snack brands worldwide, including cookies and crackers (Oreo, Chips Ahoy!,
TUC, Belvita, Triscuit, Club Social, Barni, and Peek Freans); chocolate (Milka, Terry's, Cte d'Or,
Toblerone, Cadbury, Marabou, Fry's, and Pavlides Lacta), and gum and candy (Trident, Dentyne,
Chiclets, Halls, Stride, and Cadbury).
The Company, headquartered in the Chicago suburb of Deerfield, Illinois, manufactures chocolate,
biscuits, gum, confectionery, coffee, and powdered beverages. Mondelez International's portfolio
includes several billion-dollar brands such as Cadbury (acquired in 2010) and Milka chocolate,
Toblerone, Nabisco and Oreo cookies, LU, Tang powdered beverages, and Trident gum. The
company, with an annual revenue of about $36 billion, operates in more than 80 countries.
Mondelez Canada holds the rights to Christie Brown and Company, which consists of brands such as
Mr. Christie and Dad's Cookies. Its head office is in Mississauga, Ontario, with operations in
Scarborough and Montreal.

1https://en.wikipedia.org/wiki/Mondelez_International

MBA SBM-ITB
(MM5009)
Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
A

Name: Indriana sofimarwanti

Decision Making and Negotiation

Take Home Exam
ID: 29115082

Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) International Union
The BCTGM International Union is a modern union with old-fashioned values. BCTGM are
dedicated to giving workers in our industries a voice and a vote in their workplace. We believe that all
workers should be treated with Dignity, Justice and Respect on the job.
The BCTGM represents working men and women at some of the best known companies throughout
the U.S. and Canada. We represent manufacturing, production workers, maintenance and sanitation
workers in the bakery, confectionery, tobacco and grain milling industries in North America.
The primary goal of the BCTGM has not changed in more than 125 years: To bring economic justice
in the workplace to all workers in our jurisdiction and social justice to workers throughout North
America.
BACKGROUND CASE
Mondelez, which owns a Nabisco plant on Chicagos Southwest Side, announced last summer that it
would be firing half of the factorys 1,200 workers and moving some production to its plant in
Salinas, Mexico. Mondelez opened the Mexico plant in the latter end of 2014 and started to pick up
production a year later. According to the Chicago Tribune, increasing production in Mexico is
expected to save Mondelez about $46 million per year, allowing it to increase profit margins in North
America.
The Bakery, Confectionery, Tobacco Workers, and Grain Millers (BCTGM) International union,
which represents most of the Nabisco plant workers, has been opposing the layoffs ever since they
were announced. Last month, 277 workers received their 60-day notice, with more to come later this
year.
Mondelez has negotiated the terms of the layoffs with two other unions that represent plant workers,
but the BCTGM has refused to do so. Instead the union has filed a lawsuit and complaint with the
Equal Employment Opportunity Commission, opposing the layoffs on grounds of discrimination.
Eight labor contracts covering 2,400 Mondelez workers are set to expire at the end of the this month,
and the company has begun negotiating new terms with the union.
Mondelez executives have stressed that the investment-related decision is separate from ongoing
contract negotiations. The pension plan covering the BCTGM employees is one of the major sticking
points of the negotiations. Mondelez executives say the current pension fund will be insolvent within
17 years and hope to shift employees from a defined benefit retirement plan to a defined contribution
plan.
Iron Workers Local 17 Pension Fund, Cleveland, is seeking permission to cut benefits for participants,
including retirees, as part of a proposed rescue plan awaiting approval from the Treasury
Department.The pension fund had $91.9 million in assets and $223.2 million in liabilities as of April
30, 2014, according to its most recent Form 5500 filing. Of its 2,064 participants, 640 are active. The
plan is in critical and declining status and projected to become insolvent in 2032, according to a
notice of critical status filed with the Department of Labor in August. In 2008, trustees developed a
rehabilitation plan that reduced some adjustable benefits and called for a one-time contribution
increase, according to the notice.
These are the current status of retirement plan (B&C Pension Fund), it says:
The B&C Pension Fund has been determined by the government to be in Critical and
Declining Status, which means benefits could be reduced even if youre already retired! The
Fund is projected to be insolvent in 17 years.
More than half of what Mondelz Global LLC pays into the B&C Pension Fund does not get
paid out in benefits.

MBA SBM-ITB
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Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
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Name: Indriana sofimarwanti

Decision Making and Negotiation

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ID: 29115082

The number of active employees covered under the B&C Pension Fund has declined in recent
years. As a result, the amount of money going into the Fund is also declining.
If the Company were to exit the B&C Plan, the Union claims that certain benefits negotiated
after January 1, 2007 would be cancelled by the Fund.

Figure 1. Mondelez offered Contribution

Figure 2. New Propose Pension fund by Mondelez (source: 2)

Mondelez has proposed another kind of benefit for the labor, it's a healthcare benefit. How the
healthcare benefit of mondelez works, it's the Company offering a healthcare plan with $200
(individual) and $400 (family) annual deductibles, and $1,500 (individual) and $3,000 (family) annual
out-of-pocket maximum is reached, the plan payd 100%. This plan would be effective January 1,
2017. Effective January 1, 2018, employee contributions would be:

2 http://negotiations.mondelezinternational.com/media/1204/mondelez-proposed-retirement-plan-summary022316-final.pdf

MBA SBM-ITB
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Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
A

Name: Indriana sofimarwanti

Decision Making and Negotiation

Take Home Exam
ID: 29115082

Figure 3. how plan the share cost (source3)

February 23, 2016, Company representatives hoped to continue negotiations with the Union, with the
goal of engaging in dialogue and exchanging, modifying and countering proposals. To the Company's
disappointment, the Union did not come to the table. Instead, the Union posted a letter on their
website which contains a number of inaccuracies. In response to this recent letter, Company
encourage to read the Myth versus Fact summary.
The Company has also offered an enhancement to our retirement proposal which provided to the
Union yesterday and have summarized. The Company's retirement proposal offers at least an
equivalent retirement income to what you would be entitled to receive under the B&C Pension Fund,
and our proposal provides you with more flexibility and control compared to the B&C Pension Fund.
The Company remains willing to meet with the Union and is committed to negotiating in good faith to
secure contracts that will continue to provide our employees with good wages and benefits, while at
the same time allowing the Company to successfully compete in the markets in which we operate. The
company look forward to hearing from the Union and to resuming negotiations.
The Last Negotiation
Revised Last, Best and Final Offer of Mondelz Global LLC: As of februari 2016 until April 2016 the
company propose 9 agreements, there are; contract term, pension, Health and welfare Benefits,
Wages, Ratification Bonus, Flexible shift schedules, Vacation in single days, bereavement leave,
applicable to Chicago bakery local 300 only.
The descriptions of Revised; Last, Best and Final Offer of Mondelz Global LLC:
Contract Term Four Years March 1, 2016 through February 29, 2020.

3 http://negotiations.mondelezinternational.com/media/1235/how-the-proposed-healthcare-plan-works.pdf

MBA SBM-ITB
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Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
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Decision Making and Negotiation

Name: Indriana sofimarwanti

Take Home Exam

ID: 29115082

Pension. The Company will withdraw from participation in the B & C Union and Industry
International Pension Trust Fund (the B & C Fund) effective as of the earlier of ratification
or implementation date. The Company will provide our employees in these bargaining units
with a Company retirement plan that is comparable in value to the benefits provided under the
B & C Fund (which is in critical and declining status.)

Health and Welfare Benefits. The Company is offering a 90/10 medical, dental and vision
plan, effective January 1, 2017, with $200/$400 deductibles, $1500/$3000 out of pocket
maximums and employee contributions per month, deferred until January 1, 2018, of $28 for
employee only, $54 for employee plus spouse, $45 for employee plus child(ren), $68 for
family coverage. The Company will credit $200 to each active employees Health Care
Flexible Spending Account in January, 2017 and again in January, 2018.

Wages Upon ratification, a 2.25% wage increase, all classifications, on the anniversary date
of each year of the contract ratification. Increase Airveyor rate in all bakeries to forklift rate.
Increase night work compensation from $.20 to $.25 per hour.

Ratification Bonus If ratified prior to implementation, all members of the BCTGM Locals
26, 42, 300, 358, 364, 719 who are on the payroll as of ratification will receive a $5000
ratification bonus payable within 30 days of ratification.

Flexible Shift Schedules. Only applicable to volunteers, or on new lines, or for employees
hired on or after March 1, 2016.

Vacation in Single Days Employees with five (5) or more weeks of vacation may use two
(2) weeks in single days.

Bereavement Leave Employees may take days non-consecutively with 24 hours notice.

Applicable to Chicago Bakery Local 300 only separation package for those impacted by
the pending reduction in force.

Change name of Company to Mondelez Global, LLC wherever found in the agreements.

All attached open proposals and tentative agreements.

And there are no further meetings scheduled at this time between Mondelez and BCTGM.
ANALYSIS
In this case theres a negotiation between Mondelez Internationl (now Mondelez Global LCC) and
BCTGM because of the cutting cost (for company) and layoff (for the labor) issue. Because of this
BCTGM didnt accept for Oreos labor to get a layoff.
And to solve this issue, Mondelez proposed some agreement for both sides. This situation using
Integrative approach techniques. To solves the cost cutting from the Company side then the company
offer several compensations to their employees. The negotiation is for the retirement fund plan, thats

MBA SBM-ITB
(MM5009)
Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
A

Decision Making and Negotiation

Name: Indriana sofimarwanti

Take Home Exam

ID: 29115082

a point problem of Mondelez. Two topics of the Retirement Fund plan, there are for the Health benefit
and B&C Pension Fund.

Health Benefit
Annually, the total health care cost for BCTGM-represented employees is $47 million The
average per employee cost for BCTGM-represented employees is $19,400/year compared
with $12,400 per employee for our peers

The cost of the current represented employee health care plan at Mondelz is significantly
higher than the cost of:

Salaried employees health care plans

Competitors representd employee plans

The companys other union health care plans

The companys non-union hourly health care plans

Employer-sponsored health care plans nationally

Table 1. The comparable of current and proposed Health plan by BMCTG

Then the Company propose the Health Care plans:

The Company is offering a 90/10 medical, dental and vision plan with $200/$400
deductibles, $1600/$3200 out of pocket maximums and employee contributions, per month,

MBA SBM-ITB
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Lecturer: Dr. Eng Pri Hermawan
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Decision Making and Negotiation

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Name: Indriana sofimarwanti

ID: 29115082

of $28 for employee only, $54 for employee plus spouse, $45 for employee plus child(ren),
$68 for family coverage.
The demand and offering between both of them are:
BCTGM demand deductible for $400/$800 and The company offering fo $200/400
deductibles.
$10
0

$20
0

$40
0

$80
0

$1000

BATNA

For this agreement, it may be profitable for company if reach an agreement below
$400 but a disadvantages situation for BCTGM. If it reach agreement above $400
then it's more profitable for BCTGM but a disadvantages for the Company. According
to the data, the analysis of BATNA between BCTGM proposal and The company
offer is on $400, this is the win-win solution.

The out of pocket maximums and employee contribution, BCTGM propose Innetwork is $1000/$2000
From the company, they offer $1600/$3200 out of pocket maximums
$1000

$1600

$2000

$3200

BATNA
$1800

The agreement out-of-pocket maximums, BCTGM propose between $1000-$2000,

then company offer higher maximum for $1600/$3200. If analyze by BATNA, its for
$1800. But its an advantage for BCTGM to follow the offer of company for a higher
maximums of the out-of-pocket than $2000-$3200. But on this maybe theres a
disadvantage for BCTGM in the future for another kind of negotiation.

BCTGM proposed, For the contribution single would be $62/month and to those have
family for $152/month. The company offer employee contributions, per month, of $28
for employee only, $54 for employee plus spouse, $45 for employee plus child(ren),
$68 for family coverage.
Single
$28

$37

$53

$62

$140.
5

$152

BATNA
$45

Family
$113

$124.
5
BATNA
$132.
5

MBA SBM-ITB
(MM5009)
Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
A

Name: Indriana sofimarwanti

Decision Making and Negotiation

Take Home Exam
ID: 29115082

For the single contribution the company could have a big advantage situation
if the negotiation achieve lower than $28 and for BCTGM is higher than $62.
The win-win situation is if they have an agreement for the contribution
between $37 and $53, And for the BATNA for both of them is in $45.
For the employee who have a family, they could have a profitable situation if
the agreement achieve higher than $152 and for the company if it below than
$113 ($45+68). The win-win situation is if they have an agreement for the
contribution between $124,5 and $140,5, And for the BATNA of both of them
is in $132,5.

Pension Fund Benefit

The currently negotiated benefit for Mondelz employees from the B&C Pension Fund
benefit is a monthly annuity equivalent to $76 per year of service starting at age 65 (with at
least 15 years of service)
At $1,900 Benefit Level applicable to Mondelz, a participant retiring at age 65
with 25 years of pension credit would receive $1,900 per month ($1,900 / 25 = $76
per year of pension credit)
An additional $200 toward the monthly annuity applies to certain participants with
service in 1990 or 1991
Pension is generally reduced if payment begins prior to age 65 Examples: 6% reduction at
age 64; 60% reduction at age 55
Golden 80: Pension is not reduced if payment begins prior to age 65 and participants age
plus service equals 80 or more (with 15 years of service)
BCTGM Proposed Retirement Program
Withdraw from current B&C Pension Fund
The company will meet its financial obligations to the Fund and begin making withdrawal
payments when the Fund finalizes the calculations
Immediately begin contributing to a DC savings plan for all active employees

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Lecturer: Dr. Eng Pri Hermawan
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Decision Making and Negotiation

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Figure 4. New Pension fund propose plan by BCTGM

Figure 5. New design of company contribution by BCTGM

Figure 6. Sample
retirement
comparison : Age 35
with 5 years working

MBA SBM-ITB
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Decision Making and Negotiation

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ID: 29115082

Figure 7. Sample retirement

comparison : Age 45 with 25 years
working

Figure 7. Sample retirement

comparison : Age 55 with 25 years
working

Conclusion from the figures above;

In DB plans, Employees
cannot receive benefits until
at least age 55. Benefits
reduced if paid before age 65.
If using DC plan Account Balance will be paid out. And Rollover available to avoid
immediate taxation.
When the employee dies before becoming eligible to retire, in DB Plans; 50% benefit
payable to spouse (ends with his or her death), or to beneficiary if single (payable for
3 years). Spouse must wait until the employee would have turned 55. Benefits
reduced if paid before employees age 65.in DC plans; 100% of the account balance
paid out to named beneficiary. Any remainder paid to heirs of beneficiary.
When the employee want choices when he or she retires; in DB plans An annuity is
the only option. Only flexibility is to defer receipt. In DC plans Various options,
including lump sum or installment payments.
And if the employee dies after retirement, in DB plans If elected at retirement,
continuing benefit to the employees spouse or beneficiary based on percentage

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elected. Benefit ends with his or her death. In DC plans Same as if death occurs
before retirement 100% of the account balance paid to named beneficiary.
In 8 march 2016 Negotiations resumed between Mondelz Global LLC and the BCTGM in
Baltimore, Maryland. The Company remains committed to bargaining in good faith to reach
contracts that will allow us to modernize our business and remain competitive in the global
marketplace, while also continuing to provide our BCTGM-represented employees with good
wages and benefits. Retirement security is an important negotiations topic. The B&C Pension
Fund is in Critical and Declining status, and the Fund itself projects that within 17 years, it
may not be able to pay benefit commitments to its pension plan participants.
The Union again referenced the studies it says support its claim that Defined Benefit (DB)
pension plans are better than Defined Contribution (DC) plans. Those studies did not
address DB plans that are in Critical and Declining status, like the B&C Pension Fund,
which projects that within 17 years, it may be unable to pay benefits to its pension plan
participants.
BCTGM in this situation got the key to implementing the strategies by influence the company
using the resistence point thats by their studies about the DC plans are more better than DB
plans.

RECOMMEND SOLUTION
The Solution for Company they need to predict the price they want to reach and because of
the cost cutting problem, it would be another problem for the company if the BCTGM
achieve the agreement price of the wages and another contributions too high.
The company should have a bargaining power for the position, in this situation theres no
Power in the position of Company. so the BCTGM is controlled the negotiation by
manipulate the schedule by not come to the table of negotiation and they could be manipulate
the cost they want to reach by posting it in website.
For the Health Benefits, Both of them should get in to BATNA for the agreements. Such as in

MBA SBM-ITB
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Lecturer: Dr. Eng Pri Hermawan
Class: YP 53
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Name: Indriana sofimarwanti

Decision Making and Negotiation

Take Home Exam
ID: 29115082

the agreement of deductible cost they should get in to BATNA for price $400, out-of-pocket
maximums BATNA for price $1800, Contribution BATNA for single employee is in $45, and
the Contribution BATNA price for those who have family is in $132,5. These could get into a
win-win solution.
Theres a tactics that used by Company. Its by give the maximize out of pocket more higher
than before. And more higher than the BCTGM expected and may BCTGM want to get an
agreement by that. Bit Company may be motivated to seek revenge in future negotiations.

CONCLUSION

In here BCTGM is doing fine for the negotiation strategy by Convince the Company
that the settlement is the best possible in the Pension plan.

In February 23, 2016 BCTGM didn't come for the negotiation there. Instead, the
Union posted a letter on their website which contains a number of inaccuracies. It
means that BCTGM reveal the information to the public. It means that the BCTGM
using Assess Outcome Values and the Costs of Termination for the Company Directly

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Decision Making and Negotiation

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ID: 29115082

by reveal the information to the public. Then they use strategy of Schedule
manipulations they usually more vulnerable to delaying than the company.

For the agreement of deductible cost from the medical cost, it may be profitable for
company if reach an agreement below $400 but a disadvantages situation for
BCTGM. If it reach agreement above $400 then it's more profitable for BCTGM but a
disadvantages for the Company. According to the data, the analysis of BATNA
between BCTGM proposal and The company offer is on $400, this is the win-win
solution.

For the agreement of out-of-pocket maximums, BCTGM propose between $1000$2000, then company offer higher maximum for $1600/$3200. If analyze by BATNA,
its for $1800. But its an advantage for BCTGM to follow the offer of company for a
higher maximums of the out-of-pocket than $2000-$3200. But on this maybe theres a
disadvantage for BCTGM in the future for another kind of negotiation.

The agreement of contribution is the disadvantages for the BCTGM side because
Company offer it in a low price. Because of the out of pocket maximum, the company
offer it in a higher price, So the contribution is the sacrifice of it.

For the single contribution the company could have a big advantage situation
if the negotiation achieve lower than $28 and for BCTGM is higher than $62.
The win-win situation is if they have an agreement for the contribution
between $37 and $53, And for the BATNA for both of them is in $45.
For the employee who have a family, they could have a profitable situation if
the agreement achieve higher than $152 and for the company if it below than
$113 ($45+68). The win-win situation is if they have an agreement for the
contribution between $124,5 and $140,5, And for the BATNA of both of them
is in $132,5.

DC And DB plans
BCTGM in this situation got the key to implementing the strategies by
influence the company using the resistence point thats by their studies about
the DC plans are more better than DB plans.