After reviewing the contracts, data and projections at the end of the 1984 Fontaine and Gaudin discovered that the basic supply-demand situation on VMC was changing. More of the Pacific’s competitors were going to build VMC manufacturing facilities in the near future. This meant that the market would be flooded by VMC supply and in the short term prices would fall, thus creating a more competitive market. Fontaine and Gaudin also knew if this happens Reliant would have more power to negotiate a much lower price and worst case scenario even change suppliers.
Reliant was the largest purchaser of VMC, if the contract was not extended past 1987 this would mean that the Pacific had to find another large purchaser for VMC or many small ones. To find another large purchaser was almost impossible and many small ones would want to negotiate a much lesser price for the product, thus stripping all Pacific’s profits.
In addition, Fontaine and Gaudin also knew that Reliant was probably well informed with changes happening in the market, thus naturally they would want to negotiate a much favorable price.
Gaudin contacted …show more content…
Until March 11th 1986 there was no news of the deal between Pacific and Reliant. Finally Kelsey, one of the executives at Pacific, contacted Fontaine about the progress. Fontaine notified that Reliant wanted yet another break in the contract. Due to unstable market of VMC Reliant wanted the resale rights in case they don’t use all of the VMC purchased. Kelsey advised Fontaine not to take the deal, because Reliant did get a lot of perks already. But Fontaine was against it, he thought that if the negotiations fall trough there would be a huge surplus of VMC and that would put Pacific and him in a very bad position (Lewicki “Readings”
Reliant was the largest purchaser of VMC, if the contract was not extended past 1987 this would mean that the Pacific had to find another large purchaser for VMC or many small ones. To find another large purchaser was almost impossible and many small ones would want to negotiate a much lesser price for the product, thus stripping all Pacific’s profits.
In addition, Fontaine and Gaudin also knew that Reliant was probably well informed with changes happening in the market, thus naturally they would want to negotiate a much favorable price.
Gaudin contacted …show more content…
Until March 11th 1986 there was no news of the deal between Pacific and Reliant. Finally Kelsey, one of the executives at Pacific, contacted Fontaine about the progress. Fontaine notified that Reliant wanted yet another break in the contract. Due to unstable market of VMC Reliant wanted the resale rights in case they don’t use all of the VMC purchased. Kelsey advised Fontaine not to take the deal, because Reliant did get a lot of perks already. But Fontaine was against it, he thought that if the negotiations fall trough there would be a huge surplus of VMC and that would put Pacific and him in a very bad position (Lewicki “Readings”