Assignment 4

Decision History:

SUNPOWER, INC. is a medium size company that makes solar panels.  Located in Oakland, California,, the company has been doing well financially but its growth rate has declined by 3% in the last two years.  Projections indicate that the next two years will bring the decline to 5.4%.  

The Board of Directors carefully reviewed all the business factors to determine what was responsible for creating the decline.   It was determined that over 72% of the problem arose from expenditures in the areas of governmental compliance costs due to a new California environmental regulation in the manufacturing process, state tax increases, leasing and property costs of company buildings, utility expenses, insurance and employee benefit costs.  

Concerned that the cut in profit and potential growth will continue, the Board entered into discussions with the State of California to see if reduced tax rates could be effected because of their green status.  The company also opened a dialogue with the leasing company and utility companies to see what possible reduction in costs could be obtained.  Initial responses seemed to yield little movement.

Talks with the Governor of California showed that the state was willing to reduce the company’s tax load by 10%.  Leasing, utility, and insurance creditors said that they could not decrease the costs and that in some cases the expenses were likely to increase by 6%.  Further research by the Board suggested that if the company moved to another state that was solar-friendly, SunPower would be able to receive major benefits.  SunPower went into discussions with the State of New Mexico. New Mexico is willing to give SunPower a 20% tax reduction and employees a cut by 5% to 3% (graduated by highest/5% to lowest/3% salary base) on their personal income tax for three years as a relocation credit.  The cost of doing business in New Mexico is 30% less than in Oakland.  After consultation with the CEO the Board decided to move the business.  In making the decision the Board set three major objectives as their priority: 1) they wanted as many of the present employees as possible to come with the company; 2) the costs of moving would be minimized so incentives to move could not be given; 3) the move would happen within the current tax year (10) months and; 4) customer orders would be fulfilled with absolute continuity.   After the review of various alternatives and weighting objectives the following decision was made by the Board for the Company.

Decision:

SUNPOWER, INC. will move to Sunland Park, New Mexico by December 31, 2016.