Sears Automotive Ethics Case

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The Facts The Sears Auto Centers focused on undercar services, which consisted of brake repair, replacement of mufflers, shock absorbers, and struts. In 1991, they serviced 20 million vehicles and employed 34,000 people. The Auto Centers accounted for 9% or 2.8 billion of Sears 1991 retailing revenues. The Auto Centers, however, were the least profitable of the Merchandising Division's three units contributing 5% of the divisions' profits. A substantial percentage of brake jobs performed by Sears were the basic one-axle brake job. This included replacing pads, turning the rotors or drums, repacking wheel bearings, and inspection of calipers and other brake parts. On January 1, 1991 Sears cut the hourly wages of their mechanics, installers, and tire changers at their Auto Centers. The Service Advisors (3500 employees) went from a straight salary to a commission based system. They were required to meet certain product specific sales quotas such as a number of alignments per shift and dollar volume quotas based on the value of goods and services sold per hour. Sears management implemented a fixed dollar amount, or FDA per hour which varied depending on the classification. The net effect of this action was to place these employees on a commission plan whereby the more they contribute to the shop flat rate objective ($55 per hour), the more they could earn. The employee received $3.25 per every shop flat rate objective per hour he/she contributed. The California Department of Consumer Affairs (DCA) handled complaints regarding false or misleading advertising, fraud, and unfair business practices. In the time frame between 1989 and 1992, the Bureau of Automotive Repair (BAR) received 669 complaints against Sears. This represented a little over 1% of the 18,000 complaints received annually. In response to the complaints, The Bureau of Automotive Repair of the DCA

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