The power of walking away

Talk of health reform has become frenzied in recent weeks. The latest compromises have bordered on desperation. We can't pursue the public option plan, to appease budget-weary politicians (and voters) and the insurance industry. We're uncomfortable about requiring everyone to buy insurance during the current economic climate. The insurance industry isn't going for caps on premiums. The idea of taxing high-end health insurance plans isn't faring well either. What's left are thousands of pages of legalese signifying, well, not much.

Democratic representatives, senators, and the president have all said they will pass health care reform. They say they can"t walk away from the table.

No wonder special interest groups are moving in for the kill.

Stakeholders aren't stupid. They are circling the wagons and protecting their own. Nothing will happen to them if health reform doesn"t pass. They'll still go on doing business, at least in the near term. The health care industry clearly has the advantage. If politicians don"t pass anything, the other side"s spin machines will have a heyday, and they may well lose their seat. What a mess. I wish more politicians could look at something as more important than their careers, but I"m jaded enough to know that's a pipe dream.

Thank goodness contract negotiations in metal fabrication aren't like the ones made on Capitol Hill. Can you imagine if manufacturing were like politics?

Still, politics enters any business, including contract negotiations between a job shop and OEM. When one party can"t walk away from the table, trouble arises, a supplier concedes too much and ultimately shutters because of it. Last week I talked with one contract fabricator on background about how the small company walked away from a large OEM contract. The OEM's engineers were extremely hard to work with, and the contractor had to jump through numerous hoops to ask questions and get approvals. It was simply a nightmare. The fabricator finally walked away from the table. It was costing the company too much time and money (which are the same thing) to deal with this customer. It was a gutsy move. The OEM was a dominant player in the market, and the customer came forth with threats: You'll never work in this industry again!

It turned out the contract fabricator continued on, diversified its customer base, and became more profitable than ever. Now that OEM is back as a customer, and the relationship is different. The OEM tried different suppliers to no avail, and the OEM representatives finally realized that greater collaboration was the only way to get the job done efficiently. The power of walking away earned respect for the contract fabricator, because the company offered unique services better than anyone else.

I'm sure this story isn't unique, though I'm also sure the relationship has become more complicated now, with so many companies chasing so little work. Here, like in the health debate, there are no easy answers. A company lucky enough to offer a unique service that can't be replicated easily still has a lot of power to walk away. A fabricator that does this now—no easy feat in this market—likely will endure this recession and many more.