Mercedes-Benz was looking to build their first auto manufacturing plant in the United States in 1993. The company was intent on locating in North Carolina because of their experience with their large truck division plant that was located in that state. The company’s officials did not intend on visiting Alabama and was not considering the state when Governor Jim Folsom, Jr. and other officials signaled their intent to bid on the new plant. This “give-away” was viewed negatively in a state that has a poor education system and under-funded pension system and caused Folsom to lose re-election in the next election to Fob James. The “corporate welfare” was a major issue and the expectations from the project have never been realized. In fact, William Gunther, an economist at the University of Alabama stated that the job calculations are wishful thinking and “we are suffering from winner’s curse” (Myerson, 1996). The State of Alabama gave Mercedes-Benz $300 million in tax related benefits to bring 1,500 highly skilled technological jobs to Tuscaloosa, Alabama. The minimum social benefit for the Alabama taxpayer to view this “corporate welfare” sellout is that same $300 million, or $200,000 per job. From an economic viewpoint, attracting the Mercedes-Benz plant to Tuscaloosa is attractive to the extent that a large net marginal social benefit is derived. This, from a benefit-cost viewpoint, at least $300 million, or $200,000 per job, in local and state benefits would need to be created to have this be a justifiable expenditure of Alabama taxpayer dollars. Both numbers would have to be changed to figure in the time of money and risk. When the state of Alabama views risk-adjusted present value of marginal social benefits the current valu... ... middle of paper ... ...er reading this case and researching the plant location selection of process that Mercedes-Benz undertook, I am completely against this type of “race to the bottom” type business practice. Works Cited Bjerga, Alana. Ex-Boeing CFO pleads guilty in tanker deal scandal. November 16, 2004. Seattle Times. Retrieved on December 6th, 2011. http://seattletimes.nwsource.com/html/businesstechnology/2002091816_webboeing16.html Yinger, John M. Case: Alabama and the Mercedes-Benz Plant. Retrieved on December 5th, 2011. http://faculty.maxwell.syr.edu/jyinger/classes/PPA735/cases/taxincen.htm Myerson, Allen R. O Governor, Won’t You Buy Me A Plant. New York Times. Retrieved December 5th, 2011. http://www.nytimes.com/1996/09/01/business/o-governor-won-t-you-buy-me-a-mercedes-plant.html?pagewanted=all Hirschey, Mark. Fundamentals of Managerial Economics. University of Kansas.
This paper will focus on the future of the U.S. Automobile industry as the United States recovers from the worst recession we have experienced in the past 75 years. I will provide information on the following topics pertaining to the U.S. automobile industry:
The automobile went from being a toy for society’s elite to being an essential item within the economic reach of nearly every American, all thanks to the hard work and ingenuity of Henry Ford. His dedication to quality and attention to detail earned him not only dozens of racing titles, but also the reputation of a respectable businessman. Ford understood his market so well that he knew what the people wanted before they could even ask for it, always ahead of the curve. Ford was a pioneer of American commercialism, and so his production methods were centred around efficiency and mass production, thus allowing him to increase productivity and decrees cost to meet the demand of the masses. Lastly, consideration of the working class and philosophy of raising the wages instead of raising the price point and focusing only on profit. There are a great many lessons to be learned from distinguished businessmen in history, and Henry Ford is no
Purchasing a car is one of the biggest and most important decisions that someone will make during their lifetime. Over the past several years, the prices of a vehicle have increased significantly due to the rise of inflation. Economists compare averages of vehicles to calculate and determine the cost of every vehicle that ends up on the car lot. To determine the cost they interpret all the above information and include everything from the cost of making the vehicle to the time of selling it. In the long run, the demand for vehicles is inelastic because they become a necessity for many people. However, in the short run, the demand is elastic because the purchase of a new vehicle can be put off for a while.
—. SEC Charges KBR and Halliburton for FCPA Violations. 19 February 2009. Web. 7 February 2014. .
Cloud, David. “Navy Investigating a Cheating Scandal of its Own.” Navy Times. N.p., 04 Feb. 2014. Web. 17 Feb. 2014.
Roberts, MJ, Lassiter, JB & Nanda, R 2010, US Department of Energy & Recovery Act Funding: Bridging the “Valley of Death”, Harvard Business School, Cambridge, USA.
No technology has had a greater impact on the American life than the automobile. Where we live, how we work, and how we travel, what our landscape looks like, our environment have all been shaped by the automobile. There isn’t a better place that demonstrates the social, geographic, and political changes brought by the industry than Detroit, the motor city. Detroit was situated to be a center of the American automobile industry. All of the material that was needed to build was easily accessible to the city by the great lakes waterways and by rail. The automobile industry helped people with their everyday lives and changed the way people saw the world.
...added profits to their cities, but instead everyone must focus on the future. The future is a workforce that understands pay will continue to be lead by low labor costs which will allow the product to be priced cheaper, building lasting relationships with manufactures and employees, and finally giving the public what they want and need from an automobile.
In the beginning when Tucker was trying to get established with his ideas concerning the automobile, the government helped him by giving him the funds and equipment he needed. Since the government gave him funds, money and supplies Tucker needed to produce his ideas, they signed a contract together stating rules and deadlines for this idea and how Tucker was supposed to repay the government. They also gave Tucker a factory in Chicago, where he was to start his projects and begin making the advertised vehicle. This helped him get on his feet so to speak. When they gave him this factory it stated in the contract that they could legally take the factory away and shut it down so that Tucker could not produce any cars if Tucker did not make a total of 50 cars by the deadline date, which was June first, which posed as a reasonable obligation. In certain ways the government treated Tucker very poorly and unfairly, but they also did him good by letting him start his ideas in the first place and by helping him get the funds he needed as
Detroit was once the mecca for workers pursuing the American dream. In the early 1900’s an innovative inventor named Henry Ford brought mass production of the automobile to this area, turning Detroit into a beacon of opportunity and economic success for many. This Automotive Industry has been at the base of Detroit’s economy for decades; however, it’s not like it once was. During the 20th century the auto industry had many high and lows. Many factors lead to the recent downturn of this industry that led to mass layoffs and displaced workers, which had a negative impact on Detroit, as well as the United States economy.
In 1952, Charles E. Wilson resigned as President of GM to become Secretary of Defense. At the confirmation he was asked if he could make a decision in the interest of the nation if it were adverse to GM. "Yes sir, I could," Wilson said. "I cannot conceive of one, because for years I thought what was good for our country was good for General Motors and vice versa. The difference does not exist."1 Yet his GM is accused of undermining the American transportation infrastructure and destroying a viable, superior streetcar network in order to sell more cars. Regardless of the validity of this conspiracy theory, the fact remains that America destroyed vast mass transit networks to make way for private and public automotive transportation. The question of whether the transfer from iron to asphalt was advisable also asks what makes a good transportation network. Both transportation systems are valid, but unique features of American cities and culture made automobiles the better choice. Conspiracies of the powerful in the USA pale compared to the tyranny of the majority. Regardless of economic or social considerations, public demand made the key decisions in building the American transportation network.
Ford’s production plants rely on very high-tech computers and automated assembly. It takes a significant financial investment and time to reconfigure a production plant after a vehicle model is setup for assembly. Ford has made this mistake in the past and surprisingly hasn’t learned the valuable lesson as evidence from the hybrid revolution their missing out on today. Between 1927 and 1928, Ford set in motion their “1928 Plan” of establishing worldwide operations. Unfortunately, the strategic plan didn’t account for economic factors in Europe driving the demand for smaller vehicles. Henry Ford established plants in Europe for the larger North American model A. Their market share in 1929 was 5.7% in England and 7.2% in France (Dassbach, 1988). Economic changes can wreak havoc on a corporation’s bottom line and profitability as well as their brand.
Over the past decade, the motor industry has faced many of mergers between companies in the bid to get more clients and internationalize their market share. The well planned mergers have arguably led to relative success while those that might have omitted some vital factor have had to contend with the pain of getting into damaging losses.
The development of the automobile in the late 18th century transformed the structure of society in the United States. Initially, cars were meant to give someone status in society, only the rich and privileged owned a vehicle. However, in today’s society, vehicles come at all kinds of price ranges making it easier for the average American to own his or her own vehicle thus, the ban on cars would change society drastically. Economically, the automobile industry significantly defines the economy of a nation manufacturing cars. “Despite the fact that many large companies have problems with overcapacity and low profitability, the automotive industry retains very strong influence and importance. The industry also provides well-paying jobs with good benefits, has heavy linkages with supplier industries (which gives it an oversized role in economic development), and has a strong political influence,” (industryweek.com). If cars were to be banned in the United States
The global company Mercedes-Benz is considered one of the most successful and well-known automotive companies worldwide. Since 1886, the company’s founders Gottlieb Daimler and Carl Benz made history with the invention of the automobile, including the Daimler Group, which is one the biggest producers of premium cars and the world’s biggest manufacturer of commercial vehicles globally (Daimler, 2013). Their main focus is innovation, safety, technology, style, brand image, expansion, and superior automobiles by offering the best of the best to consumers worldwide. The brand’s philosophy is to continuously create radically new products to advance the cause of human mobility. It is also the number one luxury brand in the United States and Germany while continuously expanding in China and Russia as well (Interbrand, 2013). Mercedes-Benz has a great selection on divisions such as cars, trucks, vans, buses, and financial services offered to any consumer or business. Their global reach has increased tremendously by including production facilities in 17 countries on five continents and having 93 locations worldwide. As a pioneer of automotive engineering, their strategy is to continue the same pioneer role with the ongoing development of mobility, especially in the areas of safety and sustainability (Daimler, 2013). It is very essential for the company to focus on consumers’ needs and their highly well known brand in a competitive global economy. That is why the company Mercedes-Benz releases a brand new model every year to stay on top of its competitors by improving previous models. Some strategies practiced are global marketing, global product development, global product pricing, global advertising, global distribution, an...