Problems. The main problem of USAuto is how to maintain a foothold in the industry it helped pioneer. Another difficulty is in the form of its labor contracts which will affect company profitability due to inflated labor costs. Their decision to carry on a partnership deal with AutoMex has likewise created problems for the organization, with the firm’s worries about AutoMex not being interested enough in the hybrid engine that will be their main vehicle in the deal coming true.
This in turn creates another adverse scenario for the organization: about Automex knowing so much of USAuto’s internal information, enough to become a major player and competitor. However, the problem here is not so much that AutoMex refused the offer, because as Sackrider has pointed out in the meeting between AutoMex and USAuto, there are other nations willing to supply the labor on the latter’s terms.The problem is USAuto’s refusal to make an even deal with AutoMex. Alvarado has stressed this fact in the negation letter addressed to Henderson, stating that with the terms that USAuto has put forward, AutoMex clearly has no stake or interest in the outcome of the partnership. A partnership of this kind, according to Liebenthal, Feinstein and Ingram (2004), is hollow. Symptoms.
The symptoms of the first problem of maintaining a foothold in the auto manufacturing industry consists of the following: outdated plant assets, losing significant market share to foreign auto producers, possessing no strategic advantage and relying heavily on domestic loyalty, most of which can be attributed to internal organizational weaknesses on the part of USAuto.The symptom of the second problem is the lack of trust of the organization to those they want to make a deal with. The concern regarding protection of their intellectual property rights while producing the engine in Mexico is an understandable one. However, Henderson’s complete reliance on Sackrider’s view that there is no rock-solid way to protect their intellectual property is questionable, Sackrider not even being an intellectual property specialist.
