plant that has demand for labor. Japanese companies have for a long time had
a policy of lifetime employment for their workers. Although such a policy entails higher
fixed labor costs, the benefits are increased loyalty and dedication to the company and
higher productivity. As the General Motors example in the chapter opener (p. 26) illustrated,
such a policy increases the risk of losses during economic downturns as revenues
decrease, while fixed costs remain unchanged. The recent global economic crisis has made
companies very wary of locking-in fixed costs. The Concepts in Action box on page 33
describes how a car-sharing service offers companies the opportunity to convert the fixed
costs of owning corporate cars into variable costs by renting cars on an as-needed basis.
A particular cost item could be variable with respect to one level of activity and fixed
with respect to another