Fonderia Di Torino

Length: 395 words

Main Issues 1)Purchase of Vulcan Mold-Maker/Large Capital investment: With a total cost of 1. 01 million Euros the Vulcan Mold-Maker will need to be approved by the board of directors. Having already been rejected three times for a similar type of mold maker by the board and most recently as late as 1999 this will not be an easy task. Further more Fonderia di Torino is running at 90% capacity the addition of an extra 30% capacity would currently go unused. )Worker’s Union: The current collective bargaining agreement between the worker’s union and management is prohibitive. Cost cutting in the form of human capital is not done easily and will pose a challenge, especially considering the Vulcan Mold-Maker only requires 2 employees instead of the current 24. 3)Economic Slowdown expected: The Fonderia is not running at full capacity and an economic slowdown is expected. A large capital investment that would require financing will not be easily accepted.

If the economy cannot support greater demand for the Fonderia’s goods, such a purchase may jeopardize the company. Recommendations 1)Purchase the Vulcan Mold-Maker: We recommend that the Fonderia purchases the Vulcan Mold-Maker. It is clear that the current six machines used in the creation of steel molds are inefficient and would need to be replaced within six years. The Vulcan would increase both efficiency and quality all of which are required by your clients.

We believe a further increase in quality will enable the Fonderia to solidify exclusive contracts with the high end auto makers. 2)Negotiate with Union: Our recommendation is to negotiate with union management possible remedies to anticipate and react to the upcoming forecasted economic state and its effects on the Fonderia and its workers. The purchase of equipment that may obsolete many jobs and force cuts to the current work force needs to be discussed with the union.

Options such as early retirement, severance packages or retraining may need to be implemented in order to receive a positive ROA/ROI on large capital purchases such as the Vulcan Mold-Maker. 3)Make use of unused capacity: We recommend that the Fonderia di Torino sells its unused capacity or attempts be made to increase its workload from its current clients. Aerospace and construction companies should be approached and offered the unused capacity. Because this capacity is excess it can be sold to industries other than the automotive industry at attractive costs.

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