One of the decisions facing managers illustrated in this chapter is whether to keep or drop an existing product, service, or operating segment. The analysis presented indicates that if the costs avoided by dropping the product or segment exceed the contribution margin lost, then “drop” is the correct decision from a financial perspective. However, when companies such as General Motors or Chrysler decide to drop a major product, service, or operating segment, there may be non-financial consequences involving suppliers, creditors, employees, and customers.
Required:
What non-financial consequences might General Motors or Chrysler face if they decided to drop their parts and service divisions and, instead, focus only on selling new and used cars?