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THE MICHIGAN CASE Evaluate the different alternatives regarding the future of the Pontiac Plant- what are the advantages and disadvantages of each alternative 1How should Michigan Manufacturing Corporation deal with the problem of low volume product The alternatives aClose the plant as soon as possible and transfer its products to another plant Disadvantages Products with growth potential would be transferred to new plants Loss in investment and loss in management talent Completion cost would reach 3 million The Pontiac plant has the responsibility to service three divisions of the product line and low volume products whatll happen with the actual costumers Labor relations at Pontiac were described as good Training cost is low operators can specialize on one type of machine Pontiac was a long service employer Pontiac has skilled workers with expertise Union concerns Advantages Allen believed that the plant is viable on the short run The plant had not an acceptable level of profitability Allen felt that the plant had lost its spirit The Pontiac plant could not compete for funds of investment because it did not have a positive return of assets Lower cost of manufacturing at other modern plants Actual cash flow very tight The HEDs product line had expanded inexorably for the past two decades bInvest in a plant tooling in an attempt to develop a viable operation for at least 5 - 10 year period Disadvantages High cost facilities The plant is not viable in the long run investment is then worthless because time and money would be lost Advantages Would not give competitors any entries in the heavy axle market Avoids confronting the situation right away Avoid driving customers to seek for alternative sources of product cBuilding a New Plant Disadvantages Building a new plant for low volume products is not a good idea each plant must stand alone in terms of profitability and the new plant cant
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