Poletown Dilemma
Essay Preview: Poletown Dilemma
Report this essay
The Poletown Dilemma
Contents
Introduction
Who are the stakeholders involved in the new site selection decision?
What are the factors that you would consider to choose the new site?
What is your recommendation to General Motors regarding the site choice? Why?
How would you implement your recommendations?
Exhibit 1 Comparison of costs of setting up plants in Detroit and Mid-West
Exhibit 2 Linkages with the society across the value chain
Exhibit 3 – Categorization of Social Issues faced by GM
Introduction
General Motors is faced with a dilemma. In the face of economic depression, competition from foreign players was driving down profits and the markets preference was changing to efficient cars due to increase in gasoline prices. The situation is demanding dire steps like increasing capital investments to 4 times the usual amount to modify existing plants and to build a new one that adopts new technology that enables GM to change their product line drastically.
GM has to close two existing non-performing plants and build a new one. The choice is between a plant in Detroit itself in a new area and one in a Mid-Western state. Time is of the essence as GM has to make a choice such that it can stay competitive.
Who are the stakeholders involved in the new site selection decision?
The main stakeholders in this and their considerations are summarized below:
General Motors Chairperson Thomas A Murphy – onus on him to take GM out of its current crisis.
Midwest State heads – With the economy not doing well throughout the country, they would want the plant to be setup in Mid-West and provide employment opportunities to its people.
Stakeholder
Negotiation Power
comments
Mayor
Economic development,
Enhancing public-private coalitions,
upliftment of the African American community
Medium
GM is headquartered in Detroit, so keeping good relationship with the government is important for GM
Mayor is well connected to the President
Mayor is willing to acquiring land under eminent domain to retain GM and the jobs in Detroit
Transparency in plans to relocate relocate citizens
Development of non-project areas
Only half of the Poles staying in Poletown are in support of them.
Job protection of union members. The sinking economy had already taken away 5000 jobs, they wanted to protect the remaining ones
Productivity and Quality are dependent on relations with the Union
Moving away from Detroit may cause backlash from workforce in other Detroit plants as well
Citizens
Half of the citizens do not have attachment to the place and want better jobs and lower taxes
Avoid relocation and get fair compensation in case of relocation
They can file law suits, to negotiate the price with the state based on the quick take law, but there is no impact to GM
Citizens also represent the companys customers, but this is a very small fraction
Agility in setting up new plant and executing their new strategy
This can be achieved with efficient labor, vendor ecosystem, and ease of management of new plant
GM is setting up the new plant to be able to execute a new strategy to transform the product line to compete with foreign car makers.
Agility is their primary goal, and being close to headquarters will help in faster decision making
What are the factors that you would consider to choose the new site?
As per the site qualification criteria laid down by GM, Central Park within Detroit and a plant in a mid-western state outside of Michigan were the two options.
Various factors play a role in selection of the site. They are:
Economic analysis — The table in Exhibit 1 brings out the fact that, the difference between the sites is approximately $150 m, is about 4% of GMs annual income in 1979 and 0.1% of the planned investment of 8billion per year. This indicates that it is not a very large expense for GM.
The intangible factors play a more significant role in this decision than the tangibles
Schedule
GM wanted the site to be available for construction by mid of 81, so that the plant is operational by September 1982
Poletown
Although demolition was involved, quick take law will help avoid delays
QWL program built cooperation with union, and union was in support will help quicker time to hire/relocate workers.
Detroit was where the GM headquarters were. Having new plant closer to headquarters would make management much simpler
Vendor ecosystem is already established
Mid-Western State
Much faster with ease and support from state (given in case fact)
New relations would have to be established with labor unions
Management overheads are higher for new plant when away from headquarters
Political environment and support for the business would be a third