Gb12 - Am could no longer compete and it wanted to close its Lisbon headquarters The problem was that under Portugese law the company could not

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The Location Decision Although capital generally flows into a country due to the prospect of superior returns, government incentives may also generate inbound capital flows. For example, Northern Ireland offered John DeLorean significant incentives, such as no- interest loans and facilities, to convince him to locate his sports car manufacturing plant there. The economy was severely hurt when he declared bankruptcy and walked away from many of his loans. A company should not make its location decision lightly. In some cases, a firm that decides to locate in an area has subsequent problems exiting. Consider the following examples of cases in which exiting a market proved to be difficult: 1. Pan American World Airways (Pan Am): Pan Am was one of the earliest firms to offer transatlantic air service. Its main hub was in Lisbon, Portugal. When the American airline industry was deregulated, Pan
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Unformatted text preview: Am could no longer compete, and it wanted to close its Lisbon headquarters. The problem was that, under Portugese law, the company could not fire its workers. For years, Pan Am paid workers in Lisbon for doing nothing. 2. Roots Motors: In the late 1970s, Chrysler had a big push toward international expansion. Under the leadership of CEO John Riccardo, the company bought a British firm called Roots Motors. Eventually, Chrysler decided to sell Roots Motors off. The problem was that the company had contracts with unions that required Chrysler to pay union laborers no matter what. Riccardo came up with a brilliant way to get rid of this liability: he simply gave the company to the British government. The government graciously accepted, and it ended up taking on an enormous liability....
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This note was uploaded on 02/06/2011 for the course GEB 3373 taught by Professor Crum during the Spring '10 term at University of Florida.

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Gb12 - Am could no longer compete and it wanted to close its Lisbon headquarters The problem was that under Portugese law the company could not

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