Ethical issues in the automobile industry

Ethics

Memorandum A3 Layout

In recent years the automobile industry has undergone a great deal of change. These changes have been related to the economy and vehicle recalls that some companies in the industry have experienced. This memorandum focuses on the ethical issues in the automobile industry. The memorandum will focus on the ethical implications of the government bailout for American auto makers; Toyota's handling of the automobile recall and bribery in the industry most recently carried out by Daimler AG.

Ethical Implications within your Industry:

Companies rewarded for bad business decisions and poor leadership (Economic bailout)- in 2009 three of the leading car companies in America -- General Motors, Chrysler and Ford-- received government bailouts to prevent them from going out of business. The bailout was met with a great deal of controversy because of the poor management issues that plagued these companies for years.

Loss of human lives and brand erosion (Handling of automobile Recall)- in 2009 Toyota was forced to recall millions of cars as a result of problems with sudden acceleration in certain models. Although Toyota did the right thing by recalling the vehicles, many have questioned the ethical standards of the company because of Toyota's failure to recall the vehicles at the first inclination that there was a problem.

3. Illegal Profits (Bribery in the Automobile industry) in 2010 the Daimler AG was accused of accepting bribes. These bribes allowed the company to collect illegal profits.

Applications of Ethical Approach:

1. Deontological Ethical Implication

a. In the context of business, deontological ethics dictate that a company should act in ways that are just and moral (Brady & Dunn, 1995). In many ways it was immoral for the big three automobile companies to request a bailout as a result of mismanagement. In other words many of the issues that brought auto companies to the point of having to seek a bailout were under their control and the companies failed to act in ways that would secure them in the future. The companies then went to the federal government to request a bailout paid for by taxpayers who are also struggling (Rattner & Cendrowski, 2009). One of the major issues in the American automobile industry has been the lack of innovation. For instance when Toyota and Honda identifies the need for hybrid vehicles, they carefully engineered these vehicles and go them to the market. In addition these companies focused on quality and ensuring that their vehicles would last for extended periods of time and retain their value. On the other hand American automobile companies were not as innovative and did not attempt to remain competitive. As a result, foreign companies began to take over the domestic market. Although the drastic decrease in profits did have some relationship to the global recession, poor management of these companies also served as a primary component in the decrease in profitability for the big three automakers. The manner in which companies handled this issue is inconsistent with deontological ethics.

b. The manner in which the car recall was handled illustrates that Toyota had no regard for the rules established by the National Highway Traffic Administration (Finch, 2010). Deontology is concerned not only with acting in ways that are just, but also following established rules and laws. Toyota's disregard for the law cost people their lives. Had the recall occurred when the first complaints were made to Toyota several lives could have been saved (Yunyun, 2010). Instead the company was more concerned with its bottom line and failed to act in a way that was responsible and consistent with the established rules that are designed to keep motorists safe. In this instance Toyota failed to act in a way that was just and instead the company endangered the lives of millions of drivers in the process. The company did not take in consideration their obligation to act in a way that was just and the established laws were broken so that the company would not experience a loss in profitability.

c. Like Toyota, Daimler also ignored established rules and in doing so acting in ways that were unethical. Toyota had an obligation to let the public and the proper authorities know there was a problem with the vehicles. Their failure to meet this obligation led to the deaths of several people. In addition not taking this obligation seriously has led to brand erosion and it may impact Toyota's brand for many years to come. In the case of Daimler the Security Exchange Commission established standards for ethical business practices. Bribery is a violation of these established standards. The company must have been confident that they would not be caught. In the end, they will have to pay a sizable fine to the SEC because of the violation (Pelofsky 2010). In the end the bribery did not benefit the company or increase profits because the company conducted business in a manner that was dishonest. Like Toyota, Daimler chose to ignore the established laws associated with conducting business in the industry.

2. Utilitarian Ethical Implication

a. In the future the automobile industry must choose a course of action that reflects a commitment to acting in ways that are ethical and moral. The utilitarian approach would necessitate that the various companies that make up the industry must make a commitment to consider the consequences of their actions. That is the individual companies and the automobile industry collectively "ought to prefer what is comparatively more likely to be good (Piller, 2009)." With this understood, in the future the companies that have been bailed out must make a more concerted effort to choose the appropriate leadership and ensure that this leadership is committed to the building of quality automobiles and innovative vehicles (Fuhrmans & Catan 2010).

b. The benefits associated with taking the aforementioned course of action include the development of a system of accountability. If the industry wholly decides that certain actions are most permissible and one of the company's continues to violate the established rules that company will be held accountable for their actions. The utilitarian approach is based to some degree on the reality of accountability. Accountability is important because it decreases the likelihood that a company will act in ways that have adverse outcomes. A company that utilizes accountability to ensure that the company performs ethically is acting within the confines of the utilitarian approach.

c. The harms done by adapting these courses of action are minimal. In the short-term some businesses may experience a decrease in profitability as they rebuild their images and dedicate revenues to improving the manner in which the companies function. However, in the long run the benefits will be quite substantial.

Analyze Various Audiences to Identify their Interests and Concerns:

1. For the automobile industry the main audiences are the government agencies that regulate the industry, consumers and tax payers. Each audience needs to know that the automobile industry is concerned about ethical issues and want to make corrections to the way that the industry operates.

2. The audiences mentioned have substantial interests. The regulation agencies are responsible for ensuring that the public is safe and that proper financial management is taking place. Consumers need to be able to trust that the vehicles they drive are reliable and safe. As a result of the bailout taxpayers also have interests in the companies in the industry doing well.