Question

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 $600 per repair would be appropriate, based on a flat hourly rate of $150 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 $750 per repair. You have been asked to investigate the situation and to prepare a report. Questions: Prepare a list of questions that you will need to have answered in order to analyze this situation.

Answer 1

To analyze the dispute over the steering mechanism repair rate, we need answers about how the original rate was determined, the assumed learning rate, the engineers' repair times, comparison of repair conditions, further learning curve effects, and actual dealership hourly rates in relation to the preset flat rate.

Step-by-step explanation:

Investigation into Repair Rate Dispute

In order to analyze the situation concerning the dispute over the repair rate for the steering mechanism defect on certain cars, the following questions need to be answered:

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• How was the initial repair rate of $600 determined and which factors were taken into account by the company engineers?
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• What is the basis for the 90 percent learning rate assumption made by the company?
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• Can we get a breakdown of the average time taken by the engineers who conducted initial repairs and an overview of their experience?
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• Were the conditions under which the engineers and the mechanics performed the repairs comparable?
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• How does the learning curve apply over multiple repairs beyond the first and second attempts?
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• What is the actual hourly rate for mechanics at the dealerships and how does it compare to the assumed flat hourly rate?

Understanding the learning curve dynamics as well as the time taken per repair job by different workers will be instrumental in resolving the pay dispute and ensuring that both the manufacturer and mechanics agree on a fair compensation for the repairs.