Bridgeton Industries: Automotive Component & Fabrication Plant (Acf)

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Submitted By AyumiAyumi
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Bridgeton Industries: Automotive Component & Fabrication Plant (ACF)

Description

The ACF was a major supplier of components for the domestic automotive industry as all of its production was sold to the Big-Three domestic automotive manufacturers. The ACF gone through different industrial uses until the founder of Bridgeton purchased it and it became the original plant site for Bridgeton Industries in the early 1900s. The ACF faced the competition from local suppliers and other Bridgeton plants. As market demand and supply are changing all the time; throughout the 1980s, the ACF experienced severe cut down due to the loss of domestic market share and competitive pressure.

Problems and Issues

The problem of the ACF is that even the sales were increased, the profit still falling down after several strategic steps are taken. In 1985, one of the engine plants shut down and other operations of the ACF are hanging by thread. In the 1987 model year, the overhead rate was 435% of direct labour dollar cost. There are several cost issues that hide in above status quo.

The issues that cause this problem are presented as following. The plants were planned and built to manufacture of fuel-efficient diesel engines that were consistent with a continued growth demand in the market. However, in 1985, the oil crunch and not sustained demand for diesel-powered car threatened the development of the plants. This was an incorrect anticipant decision. Furthermore, special studies stated that these two plants were not cost competitive; workers and managers knew that, and they took actions that intend to lower unit costs but it did not work.
Some overhead costs are too high according to exhibit 2 and 3; for example, wages for nonproduction employees and the benefits for hourly production workers. Because even muffler and oil pans were outsourcing, some relative costs and…...

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