From: Frank Kravitz, Manager of the Detroit Plant
RE: The Future of the Detroit Plant
These alternatives won’t fit DP and HED
As you know, I started my career in the Detroit Plant (DP) and hope to end it here. For me and other employees here, DP is a warm but collapsing family. I feel ashamed as the manager because DP no longer generates positive cash flow for the company, as I have been away from work since this prolonged illness. But I deeply believe that DP is still a valuable venture for the division. I strongly request you reconsider about these options. Simply closing the plant as soon as possible and transferring its products to other plants could hurt the whole division from the root. As the Heavy Equipment Division (HED) began its adventure from DP, DP continually contributes itself to other plants silently. Most of our key managers come from DP. The spirit of contribution always stands in DP. Second, our senior employees here are experienced and valuable; most of them already set their homes in Detroit. Early retirement is a waste and too costly for the division. Also those younger employees trained by us probably could flow to our competitors’ plant. Third, DP is still running at 69.6% of its production capacity to meet our customers’ demands. Transferring product line to other plants could increase the delivery costs and influence other plants’ routing production. Furthermore, potential break-off could damage our current customer relationship and our reputation. Investing in plant tooling to develop a viable operation for next 5 to 10 year period probably won’t work. Since basis utilities as electricity, water and fire sprinkler system are inadequate to support daily production, such improvements only on machine tooling won’t increase the whole plant’s productivity. To refresh DP, both recovering the employees’ confidence and updating utilities should be considered ahead. Building a new plant could be too risky for HED. How could HED reposition DP in the future as a new plant? If DP continues to produce low-volume axles as a new plant, the ROA will be far away from other plants and upset our investors. On the other hand, if DP begin to manufacture mid-volume or high-volume axles, since all our other plants haven’t meet its maximum capacity, it will probably steal other plants’ sales.
Recommendation: Fix DP from the root
I recommend maintaining the DP running for another 5-10 years. Moreover, improvements in labor force management, plant maintenance and production process should be applied to improve the efficiency of the operation in the plant and thus cutting cost and rebuilding cash flows.
* Labor Forces
As the “bad labor habits” problem had harmed the efficiency of the plant for years, actions should be taken to improve the labor force performance and thus cut the cost. The first step should be trying to recall the loyalty of the workers and rebuild the corporate spirit. Within the total 352 workers in the plant, 30% age of workers aged below 30, and 58% workers were above 40.This should start from the senior workers, who had served the plant for many years and were always able to influence the younger workers in work and life. We should also apply new practices like bonus policies and performance evaluation system to better motivate the workers. Secondly, the absenteeism behaviors on Monday and Friday should be eliminated. The absenteeism not only seriously harmed the workers’ loyalty and expectation of the present work but also raised potential problems in corporate culture and recruitment costs. The new labor management system would help improve the working efficiency of the workers. At last, the phenomenon of absent works proves the surplus of labor force in DP. As a result, since layoff of those workers who had devoted their hard work and intelligence to the plant is not fair, it is necessary to transmit the excess labor force to...