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Ethical Dilemma Ananlysis - Transport Company

Essay by   •  March 19, 2011  •  Essay  •  2,378 Words (10 Pages)  •  1,280 Views

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Is it right for the Transport Company A (actual name of company is confidential) to move company trucks into an owner operator environment eliminating the need for company drivers as a means to remain profitable, reduce costs, continue growth, and maintain current office staff? The move would result in an increase of company profits due to a cost reduction of maintenance, fuel, company driver benefits, and inspections. The company could still pursue their growth plan with little or no impact to the bottom line and increase lease opportunities for owner operators in the region. However, it will also result in company drivers losing their employment status and having to choose between leasing a truck with the company or being unemployed. As a lease driver, the driver is not eligible for company health benefits. The impact of the loss of company driver benefits is in contradiction to a statement within the framework of the company's mission statement which states that "taking care of families" is important, which the drivers and a small group of office personnel believe is a moral obligation of the company. The safety department and a group of office personnel are also concerned with the higher safety risk related to the owner operator driver, which could impact the company's ability to attract new customers. The company leadership wants to convert fifty company trucks to the lease purchase program to reduce cost and increase profits. On the other hand, there are company drivers and office personnel who believe the conversion to a lease purchase program is a move away from a safe reliable driver, results in a loss of health benefits for the drivers, and contradicts the obligation the company made to the drivers and their families.

Economic Outcomes: The company leadership team believes that in order to maximize revenue and minimize cost it is in the company's and markets best interest to eliminate fifty company driver positions and lease those company assets to the current driver fleet or to a new group of owner operators. The current down turn in the economy has driven down demand and increased competition for the same freight which is impacting company profits. The cost to maintain the current company driver fleet has increased to unsustainable levels by the company and requires a new direction to maintain the current level of office employees and current number of trucks. The number of trucks needs to remain at current levels in order to generate profits. An analysis of the situation revealed that even if the company reduces the current wages for the company drivers that the financial losses would still be the same since the company must reduce current bids to remain competitive when bidding for freight to haul. The end result would require management to reduce office employee staff by at least ten people, including one senior executive, and reduce the truck count by ten. The loss of the ten trucks would still result in ten drivers losing their jobs. However, if the company converts fifty trucks to a lease purchase option for the current drivers the number of trucks remains intact, the company profits are sustained, and the company can implement their growth strategy.

The decision also allows the current company drivers an opportunity to continue driving with the company, perhaps in the same truck, and gives the driver an option to purchase a truck through the lease purchase agreement. Company drivers will become small business owners giving them more freedom to generate personal wealth. The move eliminates the company's costs for fuel, maintenance, and company driver benefits.

The reduction in the company costs for assets, company driver benefits, fuel and maintenance is a huge increase to the profit margin. First, the lease agreements generate payments for the trucks and frees up cash for use in daily business activities. Secondly, fuel costs have sky rocketed over the years and with the lease purchase program the owner operator driver absorbs the costs for fuel which alleviates the company's largest out-of-pocket expense. Finally, there is a fifty percent cost reduction in what the company pays out-of-pocket for company driver benefits by eliminating the fifty company driver positions, which is a substantial cost reduction. The company leadership team sees the move as win-win for both the company and the driver.

On the other hand, the safety department and a small group of office employees biggest concern with the transformation of company trucks to lease purchase trucks relates to the higher risk associated with the owner operator and the lease driver. The company has the ability to regulate certain safety features on company trucks, but has limited ability to do the same thing on lease purchase or owner operator trucks. First, the costs for fines could increase over time offsetting the initial profits from the conversion. Secondly, an increase in a poor safety rating decreases opportunities to bid on new customer freight. The down turn in the economy allows the customer to be more aggressive in taking bids for their freight and tend to use the safety rating as a discriminator for determining a trucking company's ability to deliver freight timely and safely.

The employees and drivers are concerned about the loss of company paid benefits. There is a definite financial gain for the company by eliminating the out-of-pocket expense for the fifty company driver benefits, but the individual cost for the remaining company drivers and employees will increase with this conversion. The safety department has met with the insurance company and determined that when the bid goes out next year the costs for those benefits could possibly increase by twenty percent due to a lower number of participants in the company plan. That cost is still a drastic improvement for the company, but for the individual office employee and remaining company drivers it will be a major increase of personal out-of-pocket expense. In turn, the individual cost increase could possibly cause turnover in office employees.

The company drivers who will be required to move into the lease purchase program fear the loss of health benefits which they feel will pose personal hardship for them and their family. The increase cost for benefits outside the company is too costly for the drivers to do on their own.

Legal Requirements: Legally the company leadership is within its rights to make the changes without regards to disagreement from staff or drivers. No ones rights were ignored and the company is doing what is right in accordance with established laws and practices within the transportation industry. The drivers and employees are exercising their rights as employees by expressing their concerns, but their individual rights are still intact by the company's proposal.

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