Starting from humble beginnings in 1984, Joe Hobbs successfully built a mid-sized assembly plant in Mississauga, Ontario. His company (Atlantic Assembly Services) gained a reputation among those manufacturers that outsourced to him as a reliable and flexible assembler of goods. But early in 2012, the economy was changing, and so too were the expectations placed upon his firm. Quicker turnaround, faster delivery, and lower costs were all in demand. Competition was fierce, and Atlantic found itself with diminishing market share and revenues, along with increasing costs. In order to save the company, Joe and his management team were forced to make some difficult decisions.
It was abundantly clear to Joe that he could operate from a somewhat distant location because his customers were spread all over southern Ontario. Mississauga was becoming too expensive for his business. General facility and overhead costs were high, as were wages in the area. Thus the hunt began for a new location, and contact was made with the Economic Development offices in certain targeted cities throughout southern Ontario in order to ascertain the types of incentives that may be available.
Ultimately, Atlantic Assembly Services decided upon Midland, Ontario. Midland offered them property tax breaks for five years, reductions in utility costs, financial support for training costs when hiring local residents, and other considerations and minor relief on moving expenses. In addition to this, real estate costs were substantially lower in Midland versus Mississauga, and so too was the wage rate for comparable work. Overall, the reduction in capital and operating costs plus the municipal incentives contributed to making the decision to move to Midland justifiable.
On July 20, 2012, Joe Hobbs advised his staff of the decision. He provided each of them with the following letter:
To: Employees of Atlantic Assembly Services
From: Joe Hobbs, President
Thank you for your dedication and service over the years. I sincerely appreciate your hard work and loyalty. It is with regret that I announce Atlantic Assembly Services will discontinue operations at the Mississauga location after November 1, 2012. Reduced revenues coupled with increased costs and unreasonable demands on the part of the union have forced us to make this decision. I extend to you best wishes for your future endeavours.
1. Comment on the incentives offered by the municipality of Midland. Is this type of practice ethical?
2. Do you feel there may be challenges in relocating Atlantic’s senior management team to a smaller town such as Midland as opposed to remaining in Mississauga (a much larger city)?
3. Assess the notification made by Joe Hobbs to his employees. Are there aspects of this letter that are inappropriate? How would you re-write this notice?
4. Does a company in Atlantic’s position have a legal, moral, or ethical responsibility to the staff?