***Executive Summary***

***The Magma Copper Case***

Victor Forberger

Center for Urban and Regional Policy

Northeastern University

Magma Copper's new CEO, Burgess Winter, arrived in 1987 after the
division was spun off by its parent company, Newmont, because of
continuing financial losses. Winter's primary objective was to turn the
ailing mining company around and restore it to financial health. He
focused his initial efforts on trying to change the bitter and
paternalistic labor relations within the company, but for the most part
the unionized workers rebuffed his attempts. He was successful, however,
in bringing in new management personnel to address labor relations
issues at the mine. One of those was Marsh Campbell, Human Resources
Vice-president.

Such new personnel, however, could not stem the growing animosity during
the 1989 contract negotiations between the company and its unions. Magma
brought in security forces that were housed in trailers on company
property. One of those trailers "somehow" exploded and the CEO found
himself dodging bullets in his living room. Fearing that the violence
and retribution surrounding the earlier Phelps Dodge strike were about
to be repeated, the parties agreed to a settlement largely on the
union's terms.

With the 1989 labor agreement signed, a few union leaders still feared
that unless the labor-management relationship changed quickly the events
of 1989 would repeat themselves until the company went under or the
union was broken. Bob Guadiana, the regional director of the United
Steelworkers (USW) in Arizona, and Campbell as well as Winter began
discussing how to enact a joint labor-management cooperation provision
they had inserted into the 1986 labor agreement and funded in the 1989
contract. This provision called for a Joint Union-Management
Coordinating Committee (JUMCC) that would coexist alongside the
traditional collective-bargaining relationship.

Guadiana and Campbell called in a group of private labor-management
consultants from the firm King, Chapman & Broussard, a company
experienced in addressing labor-management cooperation. These
consultants began almost immediately to investigate the existing
relationship between the unions and the company. They interviewed a
selected group of managers and union leaders to explore their respective
commitment to forming a joint relationship gathered an enormous amount
of financial and strategic information about the company. In addition,
they also carried out their own investigation of the copper industry and
Magma's competitive position to determine whether a joint process could
even be successful.

The initial foray into a joint relationship began when the consultants
brought a selected group of union and company leaders to a factory in
Los Angeles to see firsthand how a joint labor-management relationship
had turned that operation around. This visit convinced those on the tour
that this move toward a joint relationship was at least workable. The
consultants then devised a breakthrough meeting in October 1989 for a
larger group of union and management representatives. This meeting
helped to dissipate some of the animosity among the participants by
allowing them finally to express their feelings about the working
conditions at the company. A commitment to work together for the
redesign of work processes emerged from that meeting. The company and
the unions then established a series of team-building meetings for all
the workgroups within the company so that they could begin acting on
those objectives themselves. Guadiana and CEO Winter led off most of
these meetings by delineating their respective commitment to the
relationship. The consultants who organized these meetings then
encouraged the participants through a series of exercises and
discussions to begin rethinking current production practices and their
relationships to their co-workers and immediate supervisors.

Over the next year and half and throughout every part of the company
there were record productivity gains. The consultants and other
personnel took on permanent positions coordinating the efforts of the
JUMCC and the redesign proposals emanating from the various workgroups
within the company. Each of these various teams worked on its own agenda
with its own particular methods. The consultants qua managers became the
communication channels for all these various teams, so that the joint
process had an institutional dynamic separate from the traditional
authority structure within the company or the unions. Once a workgroup
decided what it wanted to do, it developed a proposal that went to a
divisional committee for review and then to the JUMCC. If there was any
dispute over the project that could not be resolved in these committees,
the two co-chairs of the JUMCC, Guadiana and Campbell, had the authority
to resolve the matter themselves.

Alongside their efforts for developing the capacity of the JUMCC and the
resulting work redesign efforts, the outside consultants also organized
special training for company managers. Both union and company officials
were concerned that managers needed to shed their traditional authority
in the workplace and develop new kinds of leadership through their
collaboration with their employees. To that end, training for developing
that new leadership capacity was essential.

Some setbacks did occur, as over twenty percent of the company\'s top
leadership was replaced over that time and several union leaders
originally involved in the effort lost re-election bids in the spring of
1991. Such electoral defeats, however, never truly jeopardized the joint
relationship, as the new union leaders were still active participants in
the joint process, if not among the most enthusiastic. Indeed, in 1991 a
fifteen-year labor agreement that prevented any strikes or lock-outs for
the next seven years was negotiated to assure unbroken operations at the
mine, mill, and smelter. By preventing any work stoppages and securing
the joint relationship within the collective bargaining agreement, this
new contract made the joint relationship a de facto part of the
workplace. Moreover, a gain-sharing plan that saw workers monetarily
rewarded for the productivity gains for which they were responsible
started paying out. In the very first year, gainsharing averaged over
\$4,700 per worker. Those productivity gains also allowed the company to
begin the process of developing an adjacent ore supply that could extend
the life of the mine well past the year 2000.

In 1993, as the excitement from the initial gains and the energy from
the original participants began to wane, a new effort at extending the
joint relationship was initiated. It was called the \"Voice of Magma.\"
At meetings under this initiative, workers and managers gathered to
devise a company charter, working out exactly and to their satisfaction
what kind of relationship they ultimately wanted. A new consultant
group, Landmark, whose specialty was changing corporate culture, was
brought in to reinvigorate the joint relationship through these meetings
and to coordinate efforts at "re-creating the company." Along with the
JUMCC, there would now be monthly and quarterly Voice of Magma meetings
to make sure that the company and its workers had ample opportunity to
reshape their work based on what they wanted in their jobs and what the
copper market demanded of the company. As with the JUMCC, the goal was
to assure that as many employees and managers as possible could attend
these meetings devoted to restructuring work relations at specific
company sites throughout the organization. The consultants coordinated
these meetings as well as provided follow up on the decisions reached.

Because of these efforts, productivity gains continued to climb, making
Magma Copper one of the most profitable copper mining companies in the
world when once it had been among the least productive and least
profitable. In late 1995, Broken Hill Properties of Australia (BHP) of
Australia offered to purchase the company both to gain the now highly
productive mining, smelting, and refining operations but also with the
intent to learn from Magma how to extend the joint labor-management
relationship to all its various units. The purchase was consummated in
early 1996, making BHP the largest copper-producing company in the
world.

Unfortunately, just when everything seemed to be going right, the bottom
fell out of the copper market. When the price of copper plummeted soon
after its purchase of Magma, BHP found itself under intense pressure to
reduce costs as quickly as possible. BHP managers began examining every
aspect of the business to determine its cost effectiveness, and so
Magma\'s executives found their ideas constantly being second-guessed by
BHP executives thousands of miles and an ocean away. Many of BHP's
directives aimed at increasing cost-savings were ordered no matter the
impact on the joint relationship. Within a few months of the purchase,
Winter, who had become CEO of all of BHP\'s copper operations, left the
company in frustration and many key managers involved in the joint
relationship also began exiting along with the consultants. By 1997, the
JUMCC had basically become a token operation and the Voice of Magma
meetings had largely disappeared despite the efforts of a few to revive
them.

As company losses continued to mount, BHP went through a series of
management changes. With no improvement in world copper prices, BHP
decided to get out of the copper business altogether in 1999 and it put
its copper mines up for sale. When no buyers emerged, BHP made the
decision to close its North American copper operations, including the
mines associated with Magma. The improved labor relations and
productivity boosts so many union members and company managers had so
carefully crafted could not overcome the pressure of world markets or
the decisions of absentee owners. What had become a spectacular success
at building a productivity-enhancing joint partnership failed
nonetheless for reasons completely outside the control of the company's
management and its unions.