Wheelco, Inc., manufactures automobile and truck wheels. The company produces four basic, highvolume wheels used by each of the large automobile and pickup truck manufacturers. Wheelco also has two specialty wheel lines. These are fancy, complicated wheels used in expensive sports cars. Lately, Wheelco’s profits have been declining. Foreign competitors have een undercutting Wheelco’s prices in three of its bread-and-butter product lines, and Wheelco’s sales volume and market share have declined. In contrast, Wheelco’s specialty wheels have been selling steadily, although in relatively small numbers, in spite of three recent price increases. At a recent staff meeting, Wendy Yu, Wheelco’s president, made the following remarks: “Our profits are disappearing fast. It costs us $29 to manufacture our A22 wheel. That’s our best seller, with a volume last year of 17,000 units. But our chief competitor is selling basically the same wheel for $27. I don’t see how they can do it. I think it’s just one more example of foreign companies dumping their products in the U.S. market at below cost. I’m going to write my senator about it! Thank goodness for our specialty wheels. I think we’ve got to get our salespeople to push those wheels more and more. Take the D52 model, for example. It’s a complicated thing to make, and we don’t sell many. But look at the profit margin. Those wheels cost us $49 to make, and we can sell them for $105 each.”

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What do you think is behind the problems faced by Wheelco? Comment on Wendy Yu’s remarks. Do you think her strategy is a good one? What do you recommend, and why?