Stock Price and Manufacturing

Economics The author of this report is asked to assessed the financial fortunes and business decision-making of a firm named Autoedge. For the longest time, Autoedge was in a good niche in that they were providing auto parts and upgrades for all three of the major automakers. There was indeed an extra costs and such associated with the upgrades but many people trusted the name of Autoedge and were more than willing to pay the extra cost associated with the upgrades.

However, there came a point where costs and competitiveness became a concern and manufacturing operations were shifted overseas to South Korea. This decision came with a staggering cost as quality fell sharply and there has been great damage to Autoedge's image. The question becomes now whether Autoedge should persist in keeping manufacturing operations overseas or whether Autoedge should try to take advantage of the fact that the job situation in the United States is rather paltry right now.

Of course, there are still cost and competitiveness concerns involved when it comes to this. While costs may be higher if Autoedge does its manufacturing in the United States, the company can still turn that to their advantage over the long run. Analysis The Great Recession has proven to be rather persistent in terms of the fact that job recovery and economic performance after the end of the Great Recession in 2009 has proven to be rather stubborn.

Indeed, while the economy has grown consistently since the recession that lasted from 2007 to 2009, the growth rates since then have often been tepid and underwhelming (Thoma, 2014). Beyond that, the general opinion against offshoring is still rather negative in the United States even if economic conditions urge (if not shove) companies into starting or continuing the practice (Stark, 2016).

Indeed, Walmart is not going to stop its practice of buying mainly from China and the rest of Asia given that other firms in the retail sphere are doing the precise same thing and doing otherwise would be economically unfeasible (Isidore, 2015). Autoedge, on the other hand, might have a better option. Indeed, there are limited industries and situations where using domestic labor can be used as a selling point even if the costs involved are higher to the consumer.

Indeed, Apple and some other corporations have made it a point to shift manufacturing back to the United States and they have used it as a selling point while they do it (Kerr, 2013). In general, there are two reasons why Autoedge should shift manufacturing options back to the United States. First, they cannot withstand the price to their reputation that comes from the faulty quality results that are coming from overseas operations.

The loss of quality basically completely overwrites and negates the cost benefits that are seen in terms of price. Indeed, saving a lot of money on manufacturing is not really worth the trouble if sales plummet or the stock price plummets. After all, the stock price used to be almost thirteen times what it is now. Secondly, Autoedge has to understand that the automotive industry is very nationalistic and the "buy American" sentiment is very strong in Detroit and with the car manufacturing industry in general.

While Chrysler is now owned by foreign entities in the form of Fiat (an Italian company), the "Big 3" in Detroit still have sway and a presence and the general idea that Autoedge is using Korean labor and that this labor is causing a huge dive in quality makes it quite simple to explain why the stock price and the reputation of the company has taken such a hit. Further, General Motors and Ford are still owned by shareholders that are mainly (if not mostly) domestic in nature (Edmunds, 2015).

Given the above, there are indeed macroeconomic factors that can and should be used to the advantage of Autoedge. It is quite clear, and for a number of reasons, that Autoedge should move its operations back to the United States and away from Korea. In the first place, Autoedge should never have moved them to Korea if it was going to cause such a loss of quality. Second, to do this and to have American jobs lost in the process due to a business decision is even worse.

The case story points out that the pre-existing price arrangements and patterns were acceptable and palpable to the customers. They were willing to pay a premium. Even with all of that, Autoedge is going to have to pay a penance for the "mistake" they made. The people that previously loved Autoedge will probably not be so eager to return in light of the business decision that they made.

As such, Autoedge will have to put it out there that they made a bad decision and that they are going to make it right. Rather than rely on foreign labor to keep costs down, they are going to instead focus on employing and advancing American workers even if it costs more.

As noted before in this report and in the case study that was presented for this assignment, there will be higher costs but the American consumers seemed to have been willing to pay more, especially in light of the fact that the labor underpinning the manufacturing was American. However, Autoedge is going to have to give this some time as there will certainly be an element of distrust and suspicion on the part of former or prospective customers of Autoedge.

Saying that something will be done is one thing but doing it is quite another. Another consideration when it comes to all of that is the rate of pay and benefits that Autoedge gives to the employees in the United States that they hire to accommodate the above. Indeed, if Autoedge tries to be cheap and hire labor at a much lower rate than they paid before, accounting for inflation of course, they will be condemned and made a pariah by a lot of sources.

Further, Autoedge will be on thin ice as it is so any manifestation or appearance of deception must be avoided. Also, any form of "union-busting" should be avoided. Indeed, Hostess was resurrected after it went bankrupt not so long ago. What is starkly different nowadays is that many condemn the mismanagement of Hostess before it went under even with the stubbornness of the unions that were in place at that time.

Beyond that, the unions that were in place are not in place with the new manifestation of Hostess and its former subsidiaries. Indeed, very little (if any) of the new iterations of the Hostess intellectual properties reemerged as union-driven shops (Jamieson, 2016). This is a sore issue with many pro-labor and pro-employee groups. This is not to say that Autoedge should pay more than they were.

Instead, Autoedge should focus on things like lean management, supply chain efficiency and so forth to lower costs or keep them down when they bring operations back to the United States rather than engage in union busting or otherwise doing it "on the backs" of employee, their pay and benefits. Another major thing that needs to be shored up immediately is the managerial continuity and such of Autoedge. Indeed, the shift of labor to South Korea has been an unmitigated disaster and Fred Mcfadden has been terminated.

A new Chief Executive Officer needs to be named and the company needs to be put on the right track, as outlined above. So long as there continues to be chaos and lack of continuity with Autoedge, the stock price's descent (or at least it remaining where it is) and the general distrust of the company will continue. A public relations campaign that is contrite and to the point needs to be put out immediately.

Rather than glossing over the quality and off-shoring mistakes that Autoedge made, they should be fully repentant for their proverbial sins and they should assert that they should never have moved away from American labor as the customers were perfectly fine with the standards and prices that were already in place. They should also make clear that they will not engage in cost cutting that is done at the expense of the employee.

If this means that executives and such take less money so that the benefits and pay of employees are more robust, then so be it. In short, Autoedge cannot be seen as "finding" other ways to keep manufacturing cheap that come at the expense of the employees while not hurting (or actively benefiting) the executives. There is some rabid anti-executive sentiment when it comes to the pay and benefits of executives and this gets amplified when there is a union involved.

To use a real-world example, Verizon had been involved in a strike as of late and the epicenter of that strike has been the treatment of employee pensions and similar benefits in light of the fact that the Chief Executive Officer of Verizon makes nearly twenty million dollars a year USD (Maass, 2016). To tie a neat bow on the above, Autoedge thought they were doing the right thing by going overseas.

However, the American opinion about that tends to be rather dim even in the peachiest of scenarios and it is clear that Autoedge greatly botched the offshoring of jobs as the quality of.