Rubber and Foams Manufacturer

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  • Topic: Bankruptcy, Debtor, Debt
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  • Published : January 28, 2013
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Imus Institute

College Department

Case Study Number 1

Bautista, Ralph Ephraim I.

Mr. Eulogio T. Catalan

June 29, 2012

Rubatex Corporation manufactures rubber and foams for different types of products. This corporation was bought by American Industrial Partners (AIP). After 3 months of acquisition, the company lost $2 million on $68 million sales.

The plant of Rubatex Corporation is located in Bedford, Virginia. The plant was hot, dirty and crumbling. In short, the plant is not good for the products and employees. The employees also exposed in different chemicals used to create rubber and foams. Only $11.50 an hour is the salary of each worker. Each worker only has 40 minutes break in total. 20 minutes for lunch break and two ten minute breaks each 8-hour shift. They spend their whole day in lifting and loading heavy bags of compounds into mixer.

Rubatex’s plant was built since 1924 and its equipments and machines were purchased in 1940s. So what do you expect with this plant and equipments? Obviously, problems or conflicts cannot be avoided in this kind of company. Other major problem is the Labor-Management Relationship. The management states that they pays their employees well and expects a very high performance from their workers.

If the company’s productivity doesn’t increase very soon, they have no choice but to lay-off or fire 1/3 of its employees. To improve the company’s physical assets, they need another $6 million of investment. But the owner of the company didn’t want to invest on this plant anymore unless their workers ensure their commitment to improve the productivity of the plant.

The company decided to set goals to increase its sales by 30 percent. They require all the workers to work longer than the regular shift to increase output. They also reduce health care benefits for retirees to save costs.

After these changes, workers decided to call a 9-month strike. And after the strike, only 324 workers remained in this company. They file the chapter 11 stating that they will continue their operation to perform reasonably well and provide positive cash flow. But they do not count the plant in Bedford, Virginia in this file.

1. What happened here? Is there any way bankruptcy could have been avoided?

This company encountered many problems after the acquisition of American Industrial Partners. Problems with the plant, equipments and with the workers were the common problems of this company. What are the effects of these problems? They don’t produce good quality of products. Instead, they only waste time, energy and effort for creating something trash. The environment of the plant also affects the performance of the workers. The plant was hot, dirty and the smell is not good for the workers. Different chemicals are circulating around the plant and dirt is everywhere. This is not the ideal environment of a plant. That’s why workers cannot work effectively and create good products because of the ambiance of the plant.

Second major problem is the equipments or the machines used to produce new products from raw materials. The equipments are bought decades ago so expect the errors or inaccuracy from these equipments. Errors from machines or equipments will also affect the performance of the employees. Although they are working hard, giving their efforts and time, they also need working machines. Not broken or in a bad condition. They need good equipments to be able to create good and high quality products.

Last is the problem with the workers or the employees. Employees need benefits and other incentives that will motivate them to work hard for their company. They need proper compensation proportion to their efforts exerted just to serve to a specific company. I’m not saying they need special treatment or very large amount of salary. What am I trying to...
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