THE MICHIGAN CASE
Evaluate the different alternatives regarding the future of the Pontiac Plant- what are the advantages and disadvantages of each alternative?
1. How should Michigan Manufacturing Corporation deal with the problem of low volume product?
a. Close the plant as soon as possible and transfer its products to another plant.
Products with growth potential would be transferred to new plants.
Loss in investment and loss in management talent.
Completion cost would reach 3 million
The Pontiac plant has the responsibility to service three divisions of the product line and low volume products, what'll happen with the actual costumers?
Labor relations at Pontiac were described as good
Training cost is low, operators can specialize on one type of machine.
Pontiac was a long service employer
Pontiac has skilled workers with expertise
Allen believed that the plant is viable on the short run
The plant had not an acceptable level of profitability
Allen felt that the plant had lost its spirit
The Pontiac plant could not compete for funds of investment because it did not have a positive return of assets.
Lower cost of manufacturing at other modern plants
Actual cash flow very tight
The HED`s product line had expanded inexorably for the past two decades.
b. Invest in a plant tooling in an attempt to develop a viable operation for at least 5 - 10 year period.
High cost facilities
The plant is not viable in the long run, investment is then worthless, because time and money would be lost.
Would not give competitors any entries in the heavy axle market
Avoids confronting the situation right away
Avoid driving customers to seek for alternative sources of product
c. Building a New Plant
Building a new plant for low volume products...