Chapter One – Page 14
Adnan Saqf Elhait
Facts and figures:
According to the data provided in the case, it was easy to spot the financial problems that Cameron faced and how Alex managed to rescue the company from a bankruptcy by reducing costs and introducing diversity of products.
By the end of 2003, the situation at Cameron was back to normal, although there was a need to invest in a new production plant in order to separate the flexible couplings’ production line. As Cameron was not financially ready to make such a commitment; the options were either to wait for a year in order to generate more profits and financial stability, or to license the production of the flexible coupling.
In the spring of 2004 Alex signed a five years licensing agreement with McTaggart Supplies Ltd., McTaggart had to pay $100,000 fee in advance for the help of Cameron to set things up and a royalty of 3% on the first £1 million of sales and 2% on the second million. McTaggert was obliged to give a free technology flow-back to Cameron in case they reached any improvements.
Important to know that Alex signed the licensing agreement within a week; he did not take advice from his managers, he did not have any legal aid or lawyers, he was not fully aware of the licensing agreements and royalty rates.
Bellow is the facts of the case in a chronological order:
•Cameron Auto Parts was founded in 1965.
•Main Consumers were the Big Three automotive manufacturers. •Problems started in 2000 due to two reasons; first the drop of sales, second the Japanese competition. •Due to the losses in 2000 and the first six months of 2001 and the need for modernization, the company took over $10 million dollars of credit with interest rate of 7.0%. •Alex took over in 2001.
•Alex started the “operation survival” by cutting the production costs; he mainly did that by controlling the work force i.e. lay-offs. •The financial year 2002 ended with a small...