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Recommendations concerning Louisville Plant

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Re: Recommendations concerning Louisville Plant

I have written this report to provide you with information concerning whether to continue with operations at Louisville Plant or not.  Based on the information obtained I would recommend for the company to start importing the covers. The company will save on costs which is key in any company that want to increase  its profitability.  However, when using only the relevant costs, the company will incur more costs in the first year, which will be $ 65.8 million. From the second year the cost that the company will incur will be $60mmillion. On the other hand, relevant costs when the plant continues to operate amounts to $63 million. When one considers other overhead costs such as depreciation of building and equipment these costs increases $ 71 million. Therefore the company will save money when importing the covers as compared to the making the covers in the Louisville Plant.

I highly recommend the company to import the covers based on the goal of cost minimization and profit maximization.

If you need any assistance or explanation kindly contact me.

Alamer

Introduction

This reports indicates and explains whether ABC Auto should close its Louisville Plant or continue using the plant as the source of its covers. The alternative is importing the covers from another country in case the Louisville Plant is closed. In the first section of the report ABC Auto Corporation is discussed in terms of its operations. This is done in the background section. Then the various options available are discussed and appropriate recommendations are given.

Background -Recommendations concerning Louisville Plant

ABC Auto Corporation is involved with manufacturing of parts and components for manufactures

and suppliers of parts for automobiles, vans and trucks. Over the years he company has enjoyed growth in sales which can be connected to its good customer care services and reliability. Similarly, the industry at large has grown due to auto manufactures continuing to outsource  more of their productions. ABC Auto has located its plants in six different countries in order to take advantage of lower wage rates and favorable business environment. In pursuit of this objective ABC Auto Corporation is planning to either close or leave the Louisville Plant running. If it closes the plant then it will have to import the covers  from another country.

Option 1

Closing the Plant

Advantages of  ABC Auto of continuing to obtain covers from its own Louisville Cover Plant

To begin with, it will continue offering employment to approximately 400 Americans.  When the company continues to obtain covers from its own Louisville Cover Plant it will not lay any employee off and thus they will continue to work and earning their living from what they offer to the company.

Another advantage is that ABC Auto is assured of quality covers, which are delivered from its own Louisville Cover Plant. These quality products have been key in its success and well as expansion. Therefore, it will continue to enjoy trust and goodwill from its customers as well as suppliers who supply the plant with raw materials.

Moreover, the company will continue enjoying its excellent name in terms of reliability since the company will continue depending on its own plant and as such, it can manage the production of the covers. This will depend on the demand of its customers.

Finally, it will allow the company to continue expanding and not shrink since importing the covers will mean the company will start to shrink in terms of size. However, when it continues importing from its plant then the company is assured of growth since the recent statistics show that the company has been growing.

Disadvantages of  ABC Auto of continuing to obtain covers from its own Louisville Cover Plant