As a result of competition and increase in wages in the automotive industry, Chrysler Corporation is trying to reduce the cost of production and increase the production of its most popular vehicles. The company has introduced three-shifts of twenty one hours per day and the employees are expected to work for seven hours per shift. The idea has been criticized by the Union because it would lead to loss of jobs and the workers will receive lower pay as they will be working for lesser hours than the normal shifts of eight hours. This paper will focus on the decision of Chrysler Corporation and the risks of the decision.
Chrysler Corporation’s decision
The decision of Chrysler Corporation to initiate the three-shift of 21 hours per day was prompted by the increase in capital cost and wage costs. The three-shift will help the company increase the production of its most popular vehicles (minivans and Jeep Cherokee) to meet the increased demand for the vehicles. Without the three-shift, it will mean that the company will set more facilities to produce the cars to meet the high demand. The cost of building another facility is high and this will reduce the profitability of the company including its competitive strength. The three-shift will help the company increase the production of its major vehicles within the same facility (Balcet, Commisso, & Calabrese, 2013) .
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In addition, the decision of the company was prompted by the increase in wages which increases the costs of operation for the company. This leads to low profits, thus affecting the competiveness of the company in the industry. The three-shift will enable the company to reduce the wages paid to its workers. The workers will be working for seven hours instead of the normal eight hours. The increased production will enable the company to enjoy economies of scale which means that the unit production cost will reduce. This will reduce the production costs of the company leading to increased profits (Zorkóciová, Šimorová, & Šášiková, 2014) .
Risks of the plan
The decision is good for the profitability of the company and its competitiveness, but it may make the company experience a major breakdown which may make the company fall out of business. Running the plan in this manner will not provide enough time for the maintenance of machinery used in production, thus leading to a major breakdown. In addition, the company will lose expertise as many employees will stop working for the company due to low wages. The employees of the company are paid less due to the less time worked (Bruner, Davies, & Bruner, 2017) . This will increase the turnover rate in the company which will affect the image of the company.
Conclusion
To be competitive in the automotive Chrysler Corporation decided to introduce three-shifts of 21 hours per day. This is as a result of high capital costs and high wages. The company will manage to increase the production of the most popular vehicles (minivans and Jeep Cherokee) so as to meet the increasing demand for the vehicles. The company will also reduce its operational costs as the number of hours worked by each employee is less meaning that it will pay lower wages. The major risk associated with the idea is that the company will have no time for the maintenance of its machines, thus can lead to a major breakdown.
References
Balcet, G., Commisso, G., & Calabrese, G. (2013). Structuring and restructuring Fiat-Chrysler: can two weak carmakers jointly survive in the new automotive arena? International Journal of Automotive Technology and Management, 13(2) , 183-197.
Bruner, R. F., Davies, M., & Bruner, R. F. (2017). Chrysler Corporation: Negotiations between Daimler and Chrysler . Darden Business Publishing Cases , 1-45.
Zorkóciová, O., Šimorová, L., & Šášiková, M. (2014). Corporate Identity as a Strategic Tool for Companies to Remain Competitiveness in Car Industry during Current Financial and Economic Crisis . Journal of Applied Economics & Business Research, 4(1) , 3-22.
