Wriston Manufacturing Case Analysis

Topics: Net present value, Manufacturing, Investment Pages: 3 (680 words) Published: December 4, 2014


Wriston Manufacturing Corporation Case Analysis and Summary
Operation And Project Management

Overview
Wriston Manufacturing Corporation, a multi-billion dollar corporation with products targeted at North American transportation industry, had seen a decline in sales over the last three years and as a result under-performing plants of Heavy Equipment Division (HED) such as Detroit and Lima were coming under increased scrutiny on their future financial viability. The Heavy Equipment division of the Automotive Supplier group of the Wriston Manufacturing Corporation is a large axle and brake manufacturer having three broad product lines which are being manufactured in its nine plants. The Detroit Plant which is the oldest plant of HED has been operating at low profitability level for the past few years. Due to several factors explained in issue analysis, operation of the plant is not considered viable over a long term and hence a decision needs to be made about the future of the plant. The options are: 1 Close down the plant and transfer the products to other plants. 2 Invest in plant tooling so that the plant could be operated profitably for the next 5- 10 year period and then decide its fate. 3 Build a new plant to accommodate some or all of the Detroit plant products Issues Analysis. Financial Analysis

Selling the plant would cause immediate cash inflow of $4,000,000 and $6,000,000 loss from employee termination. While the company has $2,000,000 loss, this option results in the highest net present value for Wriston Manufacturing. In this option the Detroit product share segmented into three groups and redistributed to other factories. Group 1 products are sent to Lancaster, and Group 2 products are sent to Lima, while Group 3 products are terminated. This plan yields a net present value of $24,595 million. We assume that both plants will operate for 20 years and will be sold in their last years of operation. The terminal value of the sale of the...
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