Cost-cutting at Erstaunliche Autos
“We aim to boost earnings by €10bn,” says new chief at Erstaunliche Autos
Erstaunliche Autos (EA) is a medum-sized German car manufacturer based in Frankfurt. Workers have so far enjoyed a four-day week and high salaries, although production costs at EA are 40 per cent higner than similar car manufacturers. In addition, fierce international competition, including China, now poses a serious threat to Germany, where one in seven employees works directly or indirectly for the automotive industry.
EA is now facing a financial crisis. The new company chairman plans to boost productivity, which will require a drastic cost-cutting programme, and jobs may go. A group of financial consultants, Tompkins & Kosters, have been called in to help with the refinancing package. [pic]
One of your colleagues from Tompkins & Kosters is being driven in a taxi to a meeting near London. Listen to the business news on the radio that he hears. What plans at Erstaunliche Autos have already been leaked to the press?
You are form Tompkins & Kosters; you have been asked to present a cost-cutting package to management at EA. Look at the line graph above. What has happened to competition in the Chinese car industry over the last two years?
1. Work In groups of three. You need to devise a cost-cutting programme in order to reduce manufacturing costs and boost productivity at EA. 1 group: look at page 146
2 group: look at page 153
3 group: look at page 157
2. Present your cost-cutting package to management at EA. Use figures and graphs where necessary.