Reference no: EM132677120

Do not question the $130 wholesale hourly rate which is agreed on by all parties. Do not recommend splitting the difference between the two proposed rates as this is not good management practice.

Product Recall Case:

An automobile manufacturer is conducting a product recall after it was discovered that a possible defect in the steering mechanism could cause loss of control in certain cars. The recall covers a span of three model years. The company sent out letters to car owners promising to repair the defect at no cost at any dealership. The company's policy is to pay the dealer a fixed a mount for each repair. The repair is somewhat complicated, and the company expected learning to be a factor. In order to set a reasonable rate for repairs, company engineers conducted a number of repairs themselves. It was then decided that a rate of $520 per repair would be appropriate, based on a flat hourly rate of $130 per hour and a 90 percent learning rate. Shortly after dealers started making repairs, the company received word that several dealers were encountering resistance from workers who felt the flat rate was much to low and who were threatening to refuse to work on those jobs. One of the dealers collected data on job times and sent that information to the company: Three mechanics each completed two repairs. Average time for the first unit was 9.6 hours, and the average time for the second unit was 7.2 hours. The dealer has suggested a rate of $650 per repair.

Question

Write a list of questions that you will need to have answered in order to analyze this situation.