Case Study: Gian Auto Corporation

BACKGROUND OF THE CASE

Gian Auto Corporation is a manufacture and supplier of components for manufacturers and suppliers of separate for automobiles, van and trucks. The company maintains an excellent track record with everyplace 10 percent increase in sales in each year. One of the critical success factors of companys business system is the location of its plants in favorable business environments and areas with lower take rates. One of GianAutos earliest plant is the Denver Cover Plant, which basically prepares and sews coverings, mainly leather and upholstery fabrics. The person who was in charge of in operation(p) the Denver Cover Plant was Ted Vosilo.

ISSUES OF THE CASE

GianAuto Corporation found an outer supplier, which can provide coverings at a lower equipment casualty than the Denver Cover Plant. The calculate for Denver Cover Plants budget was set at $82 million, whereas GianAuto can purchase those coverings from an external party at the price of $60 million.

DENVER COVER PLANT

Budget and operate Cost for Year ending December 31, 2004 (000s omitted)

Materials                                             $32,000

Labor

Direct                           $ 23,000

Supervision                  $ 3,000

In use up plant                  $ 4,000                  $30,000

Overhead

Dep- Equipment         $ 5,000

Dep.



- building                  $ 3,000

Pension Expense         $ 4,000

Plant manager $ staff         $ 2,000

Corporate allocation         $ 6,000                  $ 20,000

Total Budgeted Cost                                    $ 82,000

        

However, on that point are additional factors that should be considered before making the finish to shut down the Denver Plant:

1. Blanket battle array had been placed with major suppliers to ensure sufficient supply for the flood tide year.

Disadvantage: if order were cancelled due to the closing, termination charges of 15 % of direct material or $4,000,000 would have to be paid off.

2. cd plant employees would be laid off

Disadvantage: Employees...

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