Case Study of General Motors

The consequences for General Motors if they fail to comply with the new proposition of 25% tariffs on all Mexican imports could mean that the company has to stop the imports from Mexico. This is because the tariff imposition was due to Trade Expansion Act 232 on tariffs which touch on national security, General Motors will thus be limited to the US produced which will reduce the size of the company as well as reduce its international competitiveness.  It would also reduce the number of jobs that General Motors usually give in the United States. It will also lead to reduced profits for General Motors since one of its profit earner vehicles will have to be cut off (Hsu, 2018).

The other United States multinational that has been hit by a similar scenario include Apple Inc. and Dell Technologies. Apple Watch and MacMini computer were affected by US tariffs on Chinese goods (Panchadar, 2018). The outcome was increased cost of production for the company. Dell technologies which import its computer parts from China was affected by tariffs on Chinese goods and increased the manufacturing operation. BMW AG was hit hard by the tariff on imports and with the increased cost of manufacturing, the company raised prices for its vehicles. BMW consequently experienced a profit fall due to the tariffs. Toyota company whose RAV4 is very popular in the United States and is produced outside the US was hit hard as the manufacturing cost went up (Shanghai, 2018). All these MNEs had to increase the cost of their prices so as to balance the manufacturing cost and the profits.

To meet the imposed tariffs, General Motors has been forced to reduce its business which consequently reduces the job opportunities. The company plans to increase the cost of individual automobiles so as to meet the high cost of manufacturing that the tariff has resulted in. General Motors plans to reduce investments and reduce wages for its reduced workforce (Keitz, 2018). The reason for the reduction of investment is because increased investment means increased import of automobile materials which are expensive. Reduced wages is due to the need to balance all the parameters of production and sales. The company plans to relocate some of its manufacturing to other countries. General Motors plans to sell the Chevrolet Cruze hatchback in Mexico, where they are produced and other global markets other than the US (Welch, 2017).  The ethical issues that the tariff introduction has brought for General Motors are the decision to increase the cost of vehicles and lay back workers. The company has a corporate responsibility to its workers despite the changes in the policies and regulations of the country. Therefore, a reduction in wages and firing of some of its employees will have a catastrophic effect on the corporate image of General Motors. Consequently, the decision on what amount of money to increase per vehicle presents an ethical situation where the company has to make reasonable price settings so as not to exploit the customers at the same time not hurt its profitability aspect.