When Ford purchased Volvo AB's car division in 1999, they had to decide what to do about the differences in the fringe benefits received by the employees. Although Ford plants have fitness centers, these centers do not have the amenities offered at the Volvo plants such as Olympic-size pools, badminton and tennis courts, tanning beds, and saunas. One reason for the high level of fringe benefits at Volvo is the extremely high tax rates in Sweden. Company- supplied services such as plush health facilities are not taxed by the government. However, Ford employees in the United States might be tempted to argue for "perk parity" especially during union contract negotiations.31
Suppose UAW negotiations argue for upgraded perquisites for Ford's U.S. employees to match those available in the Swedish plants Ford acquired from Volvo.
a. Ford might achieve perk parity by upgrading U.S. facilities or by reducing Swedish facilities. What would be the implications of each policy?
b. Ford might live with different levels of perks. What would be the implications?
c. Suppose the difference in perks between U.S. and Swedish employees is reduced fol- lowing the merger. What are the efficiency implications for the merger?