Importance of Culture in International Law

Ethical vs. Moral Issues

Windsor Automotive Supply Company

Questions

1. What are the moral issues;

2. What are the legal issues;
3. What issues could be considered both moral and legal;
4. Would your answers be the same if this case took place in Vietnam.

Facts

Windsor Automotive Supply Company is located in Windsor, Ontario, Canada. It was created in 1979 by 2
brothers, Gino and Frank Cardoso, both residents of Windsor. The Cardoso family came to Windsor from
Italy in the early 1930’s and have lived there ever since.

The company’s business is the design and fabrication of industrial dies and moulds. These are precision
tool dies and moulds that require a substantial engineering quality to ensure they conform to specifications
of the ordering company. These dies and moulds are used by the ordering company to produce engine
parts of strict and specific size, weight and intricacy. Any flaw in the dies and moulds will result in a vehicle
engine not functioning and can result in a huge loss for the ordering company. These dies and moulds are
produced for the automotive industry. Windsor is the Canadian headquarters to Chrysler Canada, and both
Ford Motor Company and General Motors have a substantial presence in Windsor. There are at least 10
automobile production facilities in Windsor and a very large number of automobile parts suppliers.

The main customer of Windsor Automotive (receiving 95 % of Windsor Automotive dies and moulds) is
Chrysler Canada. Windsor Automotive and Chrysler have worked together since 1986 and the CEO of
Chrysler Canada is a social acquaintance of the Cardoso family. Windsor Automotive is totally dependant
on its contractual relationship with Chrysler to supply it with the highest quality dies and moulds. The loss
of Chrysler as a customer would result in the bankruptcy of Windsor Automotive.

Windsor Automotive is a medium-size company and for the past few years has been extremely profitable.
It is privately held with the 2 Cardoso brothers equally holding all shares. In 2012 the companies’ gross
revenue hit $60,000,000 CDN and the operating profit was $4,000,000 CDN. The company has no unusual
debts and its financial position is relatively strong. The automobile industry, however, is very cyclical and
Windsor Automotive suffered serious losses in the economic downturns in the past which almost resulted
in the bankruptcy of the company. The brothers have always indicated they will diversify their customers,
but to date have not done so. They have also not groomed any possible successor to head the company
and they are respectively 69 and 66 years old.

The Cardoso family is very well-known in Windsor and has been extremely supportive of charitable
organizations in Windsor. They are well-liked and considered a very important economic factor in the
Windsor area. Gino Cardoso has 3 sons, one of whom he hopes will take over his interests in the company.
To date none of his sons have shown strong financial or managerial qualities. His oldest son, Tony, however
has had difficulties with the police and there are strong indications that he has a serious drug problem
(cocaine). He has been jailed on 4 previous occasions due to this problem. He is employed as the Director
of Marketing for Windsor Automotive as he is an excellent salesperson and an extremely personable
individual who is well liked. He is married with 3 children, but is known around Windsor as someone who
has a very strong like for women. He is also rumoured to have a serious gambling problem and rumours
indicate his drug problems are hidden but not under control.

© Stephen Murdoch
The most important person in Frank’s family in his daughter Rose, who is Financial Controller in Windsor
Automotive. She received her MBA from the University of Michigan and is extremely talented in finance
and devoted to the company and to her family. Her relationship with Tony is very poor and the two do not
speak. She would very much like to take over the company upon the retirement of Frank and Gino
however there is little enthusiasm inside the company at all levels, including the factory, for a woman being
C.E.O. There have been incidents of sexual harassment against Rose involving other top level management
employees of Windsor Automotive, however Rose prefers to keep these quiet in the hopes she will have
access to the top position. If she feels, however, that she is being overlooked for the top position due to
her sex, then she is prepared to hire a lawyer and proceed with appropriate legal action against certain
management employees for sexual harassment. She would even consider a case for sexual discrimination
against the company if she were to be overlooked for the C.E.O. position.

Windsor Automotive employs 600 Windsor and area residents. They are employed in all areas of
management, skilled trades, and unskilled/manual work. The company is not unionized, although the
United Auto Workers (UAW) has been trying for years to unionize the company. The Cardoso family,
however, is very generous with their workers and many of them are on a first name basis with the two
bosses. Employees at Windsor Automotive are generally happy, and well paid, with good benefits, and very
loyal to the company. The average age of the employees at Windsor Automotive, however, is 46 years old
and they have been doing very little hiring in recent years in order to hold down costs. Windsor
Automotive has started a new program to hire a limited number of young skilled professional tool and die
makers, however this is a very competitive market and these workers demand top salaries. Windsor
Automotive has been unable to keep new, young skilled workers due to their strong market demand.

Windsor, Ontario is a city of 200,000 inhabitants. The major, and virtually only, industry is automobile
production and auto parts production. This includes all related industry such as suppliers, logistic support,
high tech auto part design, etc. The unemployment rate in Windsor for 2013 was 6 %, which is below the
national average. A full 60% of the working people in the Windsor region are employed in the automobile
and related industries. In such a cyclical industry such as this, however, unemployment reached a high of
almost 20% during the recession of the early 1990’s. Although the city has tried to diversify (constructing a
Las Vegas style casino) the principal employers of Windsor generally remains the same and the city of
virtually dependant on the auto industry.

Windsor Automotive is currently being challenged in its position as dominant supplier to Chrysler by a
company which has recently moved to Windsor. The name is Delhi Technical Equipment, which is a
subsidiary of Mitsubishi Heavy Industries of Japan. They are making a major drive to take the Chrysler
Canada work away from Windsor Automotive and have substantial political involvement in provincial and
municipal politics in Windsor. They heavily donated to the NDP political party in the recent provincial
election and their supported candidate was voted in. They are now putting very strong pressure on this
government official to use his power to “have discussions” with Chrysler.

Delhi are proposing to greatly reduce the cost of precision equipment, dies and moulds to Chrysler by
moving production offshore to their large factories in South East Asia. Although there could be logistical
issues with this scenario, Delhi is prepared to substantially invest in improved logistical equipment and
infrastructure, and I.T. to solve any potential problems.

Chrysler has refused to automatically renew its contact with Windsor Automotive and has decided to invite
all tool, die and mould suppliers to bid for this lucrative contract. As a result, the privileged relationship
between Chrysler and Windsor Automotive is of little importance. In addition, Chrysler has indicated that
with NAFTA (North America Free Trade Agreement), and dramatic improvements in transportations
methods and infrastructure throughout North and Central America, they will show no priority to suppliers

© Stephen Murdoch
in the Windsor region and will accept any bids from Canada, the United States and Mexico. Chrysler
suffered losses in the past and are looking for dramatic cost savings from their suppliers.

Windsor Automotive has been very unpleasantly surprised by this turn of events. Rose, as Financial
Controller has warned of this possibility for a number of years, but the brothers have failed to take her
comments seriously. The gravity of a loss of this contract has now come into place and they are making
serious decisions on how to deal with it. They know that if they propose to Chrysler to maintain the same
costs structures, their bid will fail. Thus they have called in outside consultants to assist them with their bid
for this Chrysler contract.

Consultant Review

The consultant has found that the very high pay and benefits of Windsor Automotive employees cannot be
maintained if they are to win the Chrysler contract. He knows, however, that the employees would never
agree to a wage and benefit cut. As such he has suggested that a serious look must be made to moving all
die and mould production to Tampico, Mexico where a vacant factory is available for approximately 30% of
the rent for the current Windsor facility. There are adequate supplies of skilled workers, however they do
not have the top-level expertise of the current Windsor workforce. Their pay and lack of medical benefits
will result in savings of approximately 70% of the wages and benefits currently paid to Windsor Automotive
employees.

Transportation links from Tampico to Windsor and to Chrysler are adequate, however are not as secure as
in a Canada only environment. Setting up a plant in Tampico would result in substantial savings for
Windsor Automotive, however would result in the layoff of some 600 Windsor employees and the likely
shutdown of the Windsor plant. As indicated, the age of the workforce at Windsor Automotive is relatively
old and the large majority of any laid off workers would have an extremely difficult time finding other
employment. Almost all of the workers are from families where they are the only wage earner and a lay off
of this nature would have dramatic consequences on the employees and their families.

As a result of the consultant’s report Tony and Rose have been sent by their respective fathers and bosses
to Mexico to make all necessary inquiries about the possible move of the plant to Tampico. Tony has
visited with the local Mexican governmental authorities who have indicated they would do virtually
anything to secure a skilled manufacturing plant to the Tampico region. A representative of the Mexican
Ministry of Industry has in fact set up a bank account in Switzerland in Tony’s name in which he has
deposited $100,000 USD on the condition that the plant be moved to Tampico. Rose is totally unaware of
this. Rose has found that the level of skilled workforce in the Tampico region may be below standards for
Chrysler, however Tony is completely against this and says with adequate training these workers could be
operational almost immediately.

The local government has also indicated Windsor Automotive will receive almost tax free status if they
locate here. The local governmental authorities, however, have recently been accused of having close ties
to large drug gangs and are very keen to claim a success such as this in order to remove the unwanted press
they have been recently receiving.

Tony’s report to Gino and Frank is strongly recommending the move to Tampico.

However, an internal audit of Windsor Automotive was conducted by the consultants as part of their
investigation of the potential move. Standard Stamping Corporation is Windsor Automotive’s number 2
customer after Chrysler. This audit report indicates that Tony has been falsifying orders made by Standard
Stamping to Windsor Automotive. A substantial part of the revenue received by Windsor Automotive from
Standard Stamping has been disappearing into a shell company located in the Cayman Islands. It is obvious
that Tony is siphoning income from the company for his personal benefit and that this has passed without

© Stephen Murdoch
anyone’s knowledge. This is an obvious fraud and if reported to the police will result in the arrest of Tony.
Tony’s father Gino, however, is aware of this information and does not want this information to become
public. He has ordered the consultant to advise no one of this find. The consultant, however, has indicated
that he was hired by Windsor Automotive, and not the individual shareholders personally, and must report
this fraud. As Tony has many friends in the Windsor financial community he has advised the consultant
that if this information becomes public, he will personally destroy the consultant and will ensure he never
works again in Windsor. There have been actual threats of physical violence against the consultant if this
information becomes public.

Rose has continued with her investigation of Tampico unaware of all of this. She has uncovered, however,
that the plant being offered to Windsor Automotive in Tampico was previously used by a similar American
enterprise which left the region of Tampico on very bad terms due to a very poor record on safety issues.
In discussions with local authorities, Rose has learned that safety issues in this region of Mexico are of no
importance as there are lots of poor people very willing to risk their health and safety for a job. In fact local
Mexican officials are unconcerned for the welfare of the local residents – they just want a “victory” in
securing the plant to aid in the advancement of their political careers. The Chief Safety Inspector for the
region has indicated to Rose that for $10,000 per year he can ensure a clean safety certificate for Windsor
Automotive.

© Stephen Murdoch