Southern Discomfort Case Analysis
Jim Malesckowski remembers the call of two weeks ago as if he just put down the telephone receiver: “I just read your analysis and I want you to get down to Mexico right away,” Jack Ripon, his boss and chief executive officer, had blurted in his ear. “You know we can’t make the plant in Oconomo work anymore, the costs are just too high. So go down there, check out what our operational costs would be if we move, and report back to me in a week.” At that moment, Jim felt as if a shiv had been stuck in his side, just below the rib cage. As president of the Wisconsin Specialty Products Division of Lamprey Inc., he knew quite well the challenge of dealing with high-cost labour in a third-generation, unionized U.S. manufacturing plant. And although he had done the analysis that led to his boss’s knee-jerk response, the call still stunned him. There were 520 people who made a living at Lamprey’s Oconomo facility, and if it closed, most of them wouldn’t have a journeyman’s prayer of finding another job in the town of 9,900 people. Instead of the $16-per-hour average wage paid at the Oconomo plant, the wages paid to the Mexican workers-who lived in a town without sanitation and with an unbelievable toxic runoff from industrial pollution-would amount to about $1.60 an hour on average. That’s a savings of nearly $15 million a year for Lamprey, to be offset in part by increased costs for training, transportation, and other matters. After two days of talking with Mexican government representatives and managers of other companies in the town, Jim had enough information to develop a set of comparative figures of production and shipping costs. On the way home, he started to outline the report, knowing full well that unless some miracle occurred, he would be ushering in a blizzard of pink slips for people he had come to appreciate.
The plant in Oconomo had been in operation since 1921, making special apparel for persons suffering injuries and...
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