Honda Motor Company & Learning Curves
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Honda Motor Company has discovered a problem in the exhaust system of one of its automobile lines and has voluntarily agreed to make the necessary modifications to conform with government safety requirements. Standard procedure is for the firm to pay a flat fee to dealers for each modification completed.
Honda is trying to establish a fair amount of compensation to pay dealers and has decided to choose a number of randomly selected mechanics and observe their performance and learning rate. Analysis demonstrated that the average learning rate was 90 percent, and Honda then decided to pay a $60 fee for each repair (3 hours x $20 flat-rate hour).
Southwest Honda, Inc., has complained to Honda Motor Company about the fee. Six mechanics, working independently, have completed two modifications each. All took 9 hours on the average to do the first unit and 6.3 hours to do the second. Southwest refuses to do any more unless Honda allows at least 4.5 hours. The dealership expects to perform the modification to approximately 300 vehicles.
What is your opinion of Honda's allowed rate and the mechanics' performance?
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Solution Summary
This solution discusses learning curves and Honda Motor Company based on a modification needed to meet safety requirements. It discusses the fairness of the company's offer in relation to the amount of time it takes the deal to perform the modification.
Solution Preview
It appears that the allowed rate is not adequate if six independently working mechanics each came up with a time in excess of the three ...
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- BA, University of Southern California
- MSS, United States Sports Academy
- Ed.D, Boise State University
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