Some years ago, General Motors installed industrial robots worth billions of dollars in its automobile assembly plants, believing that the robots would increase efficiency and decrease assembly costs for its manufacturing processes, hence improving profitability. In fact, General Motors lost many billions of dollars more, despite the fact that it was able to make automobiles more quickly using the robots.
Discuss the reasons for this paradox. What costs did General Motors fail to consider?What about depreciation? Couldn't they have offset many of the costs you mention with increased depreciation costs? In your opinion, did GM's cash flow position suffer because of the decision-making on the robots? Explain.