I would like to provide the reasoning for that decision and would also like to point out the ethical issues that have risen for the company.
The company being one of the large automobile manufacturers of the world produces two different types of vehicles, one being the SUV’s and the other being the light trucks. Of late, the company has faced issues remaining profitable for its shareholders. There are about 1,000,000 of these types of vehicles on the road and all of them having a good reputation amongst its customers. The engineers in the company have found some balancing issue in the vehicles and due to that the company had to face five law suits lately. All those law suits had to be settled amounting to $500,000 in total. To fix the balancing issue in the vehicle, it would cost $180 per vehicle after all the vehicles would be recalled.
The main ethical issue that is to be considered is the knowledge of the defect in the vehicles not been conveyed to the customers. Although the company has faced five different legal proceedings, it has dealt with them with any disclosure made to the public at large. This issue of not disclosing the information to the public may cause severe damages as all the customers using the vehicles face the risk of death in an accident. This may cause the drivers of the vehicles to face severe accident which may life threatening or may cause any other disability to the drivers of the vehicles.
Recall the vehicles; this would cost the company around $18,000,000 but in such a drastic period where profits have been deteriorating, the shareholders would not agree to this. This $18,000,000 would be a major cost that the company would have to bear and because of this cost the other stakeholders that might get affected are the employees. The employees would have to be paid extra for the additional work to be done, this would further upset the shareholders as the profits would further diminish and have a negative