The Stanhope Project
ABI started as the Farm Equipment Company after World War I. The company began using diesel engine parts for their tractors. The company saw progressive growth and became a multimillion-dollar company by 1940. During World War II the company became a producer tanks and trucks for the military. Once the war was completed the company began to establish itself as a producer of automotive parts. The company renamed itself the Automotive Builders, Inc. Even after the name change, and move into the automotive industry, the company continued to be a large player in the farming market.
Jim Wickes was in charge of recommending projects to Steve White the executive Vice President for ABI. This case involves the decision of whether or not to move forward in a flexible manufacturing project for Stanhope Iowa. Ann Williamson composed a project that had large risks and large rewards. The decision of whether to accept the project posed large financial issues for the company. A large tractor company “Big Red” was entertaining the idea of negotiating a contract for a single source for all of their diesel engines. Recently the Japanese tractor companies had become very competitive. ABI could lose market share if this decision is handled poorly.
ABI’s upper management now had to decide whether they would be interested in maintaining their stronghold in the agriculture market or whether they should allow the project to pass because of the lack of return on the investment. The company would have to calculate if this investment would dilute the already excellent return on investment, if the cost will be returned by the equivalent reduction in labor, if the there is any asset protection and does the proposal maximize ROI, sales potential, or total profit.
Jim Wickes needed to follow the business strategy ABI had developed. The company only...