Group 2 Michigan Manufacturing Corporation

MICHIGAN
MANUFACTURING
CORPORATION
Group 2 :13PGP061 Aman Anshu
13PGP097 Poorva
13PGP102 Punit Manot
13PGP117 Yogesh Gupta
HEAVY EQUIPMENT DIVISION

This division of MMC mainly focused on Transportation
Industry.
Its main components were on- and offhighway axles,
brakes, Drive train and Suspension components.
MMC profit had been declining for 3 years, therefore
HED is under pressure to perform well.
Different plants are fractioned on the basis of
complexity.
COMPLEXITY
Complexity of Plant Managers Job Depends on the
products produced in the plant.
3 Levels of complexity is defined in HED Product Line
Product families
Product Model
PRODUCT LINE
It is the very important measure of complexity. There
are three Product Lines in HED : On- Highway Axles (6 Plants)
Off-Highway Axles (3 Plants)
Brakes (2 Plants)
The Table of Which is given by (Exhibit 1)
PRODUCT FAMILIES
Different families typically required unique routing while
on product line. The Pontiac plant made : most of the Low volume families
Prototypes for new products
Replacement parts for the old one.
PRODUCT MODEL
A Product Family can comprise of models up to 20
types.
They follow same routing but require different tooling or
according to customers need.
Each of the plants has to be stand alone in terms of
profitability.
Major Concern was return on assets employed.
DIVISIONAL MAIN CONCERN

Managing the Divisions complex set of manufacturing
families. Whether to sell plant and machinery to
customers or keeping the plant open and transferring in
products from saginaw.
HEDs product line, which expanded inexorably.
THE PONTIAC PLANT

It is the oldest plant of MMC. Over the time profitable
products were shifted to other dedicated plants. The
pontiac plant remained with
Low volume products- 60% On-Highway and 40% offHighway
Replacement parts for all the old one.
FACTORS CAUSING POOR

PERFORMANCE
Allen, the newly appointed plant manager, determined
some contributing factors for decreasing performance of
plant while she was division controller for 5 years.
These are o Investment
o Machine Tools
o The Plant
o Labor
o Overhead
o Product Costs
MACHINE TOOLS
Variety of machine tools were used.
Due to antiqueness of tools and low volume per model
setup time, generally ,run 10 times then for a making of
part.
Average age of machine tools at

Pontiac plant- 33.1 years
HED- 15.9 years
THE PLANT
A 1986 report had stated Electric system is inadequate.
The sewer system is springing leaks.
Plant is below our insurance standards.
Thus plant needs major improvements increasing
overhead cost.
LABOR
Union UAW, America. Machine operators were skilled
workers. Main problems were Bad labor habits had developed over the years
Absenteeism and turnover
Polarization among employee
Culture and expectations changed
Wages are higher than new employees.
OVERHEAD
It is significantly higher than of other plants Allen felt
the factors are
increasing maintenance costs
Past-service pension ($648,000 expense in 1987)
The previous manager once said Many of these retired
employees had worked on products that had later
transferred to other, yet the pension expense remained
with the pontiac plant.
PRODUCT COSTS
A uniform product costing system.
In this system a uniform cost of product is decided
irrespective of plant.
In this Process all new technology plants are in benefit
as cost of production is less than pontiac plant.
THE PONTIAC PLANT STUDY GROUP

A feasibility study was conducted ,under Allen, to
evaluate alternatives for pontiac. The team put the
pontiac plants products inthree general groups:
On-highway axles that are economically worth
continuing to produce.
Off-highway axles that are worth continuing.
Both on- and off-highway axles that are not
economically justified.
STUDY GROUPS
It was also realized that the plants visible overhead
were very very less compared to the others. But the
numbers were against Pontiac and the stay wasnt
justified and some considerations were also to be made
before that, Employees. Customers.
Competitors. MMCs situation .A feasible short term
initiative was required to make place more profitable
before making any longer range plans.
COMMENTS ABOUT GROUP-1

Price increase of the products 10%Avg.
Direct Labor Saving 5%
Materials Cost Savings 2%Tooling Cost
8.5 million $ Fully Loading
the volume of our underutilised plants for better
advantage of economics of Scale.
COMMENTS ABOUT GROUP 2

Direct Labor Savings 6%
Materials Savings 1%Tooling Cost
$5.5 millionIncremental Overhead costs
$420k / year/ plant
COMMENTS ABOUT GROUP-3

The Direct Labor content is too high.
Volume is just too low.
Can be produced at any other plant at lower cost than
Pontiac.
The Question is : If we drop the axle what do we do for
our customers ?
ALTERNATIVE FOR THE PONTIAC

PLANT
Closing can bring $2 million.
Employee termination cost $3 million.
If kept , maintenance would cost $1-2 million/year.
Remaining time till it falls apart 6-10 years.
A NEW PLANT.
Savings $1.5 m per year based on Pontiac
Invest in plant and tooling $18.5 million.
Start up cost $3 million.
3 MAJOR ALTERNATIVES IN FRONT

OF ALLEN
Close the plant as soon as possible and transfer
products to the other plants.
Invest in plants tooling as an attempt to develop a
viable operation for at least the next 5-10 years.
Build a new plant.

Group 2 Michigan Manufacturing Corporation

Uploaded by

Copyright:

Available Formats

Group 2 Michigan Manufacturing Corporation

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Group 2 Michigan Manufacturing Corporation

Uploaded by

Copyright:

Available Formats

MICHIGAN

HEAVY EQUIPMENT DIVISION

DIVISIONAL MAIN CONCERN

THE PONTIAC PLANT

FACTORS CAUSING POOR

Average age of machine tools at

THE PONTIAC PLANT STUDY GROUP

COMMENTS ABOUT GROUP-1

COMMENTS ABOUT GROUP 2

COMMENTS ABOUT GROUP-3

ALTERNATIVE FOR THE PONTIAC

3 MAJOR ALTERNATIVES IN FRONT

You might also like