Fondiera Di Torino Spa
Case Introduction
Fonderia di Torino S.P.A, founded in 1912 by Benito Cerini, was a manufacturing company which produced metal castings using semi-automated molding machines. The company’s main line of business was the production of precision metal castings for use in automotive, aerospace, and construction equipment. The company excelled at this and was awarded because of the quality of its products.
The mainly European customers of Fonderia di Torino were original-equipment manufacturers (OEM). The OEMs insisted on quality products. The OEMs gave preferential treatment to Fonderia di Torino. The confidential market-demand information that Fonderia di Torino received helped increase the precision of production scheduling and the company received relatively long-term supply contracts from the OEMs.
The company grew slowly but steadily since late 1940s, and its current sales are expected to be €280 million.
In November of 2000, Fonderia di Torino was faced with the decision of purchasing an automated molding machine called the Vulcan Mold-Maker to replace the six machines currently in place.
The firm currently was using semi-automatic machines for the production of castings, which had low productivity, and lack of consistency in quality. Also, these semi-automatic machines would need to be replacement after six years.
The Vulcan machine had higher productivity, better quality and would occupy less space. Also it has a useful life of eight years.
Case Analysis
In order to decide whether to replace the old machine with the new one or not, we focus on the Net Profit Values in the two situations i.e. with the Vulcan Mold Maker and the 6 semi – automated machines. In order to evaluate, we do the following steps:
1) Calculation of the cash outlay for buying the new Vulcan Mold Maker
2) Operating cash flow for the company for the both machines across their useful lives i.e. 6 remaining years for semi-automated machine and 8 years for Vulcan Mold maker
Fonderia di Torino S.P.A, founded in 1912 by Benito Cerini, was a manufacturing company which produced metal castings using semi-automated molding machines. The company’s main line of business was the production of precision metal castings for use in automotive, aerospace, and construction equipment. The company excelled at this and was awarded because of the quality of its products.
The mainly European customers of Fonderia di Torino were original-equipment manufacturers (OEM). The OEMs insisted on quality products. The OEMs gave preferential treatment to Fonderia di Torino. The confidential market-demand information that Fonderia di Torino received helped increase the precision of production scheduling and the company received relatively long-term supply contracts from the OEMs.
The company grew slowly but steadily since late 1940s, and its current sales are expected to be €280 million.
In November of 2000, Fonderia di Torino was faced with the decision of purchasing an automated molding machine called the Vulcan Mold-Maker to replace the six machines currently in place.
The firm currently was using semi-automatic machines for the production of castings, which had low productivity, and lack of consistency in quality. Also, these semi-automatic machines would need to be replacement after six years.
The Vulcan machine had higher productivity, better quality and would occupy less space. Also it has a useful life of eight years.
Case Analysis
In order to decide whether to replace the old machine with the new one or not, we focus on the Net Profit Values in the two situations i.e. with the Vulcan Mold Maker and the 6 semi – automated machines. In order to evaluate, we do the following steps:
1) Calculation of the cash outlay for buying the new Vulcan Mold Maker
2) Operating cash flow for the company for the both machines across their useful lives i.e. 6 remaining years for semi-automated machine and 8 years for Vulcan Mold maker