CASE
STUDY 3 Industry: Manufacturer-Wire Formed Products Size: 140 people; two locations. Entity: Non-public corporation; two 50% shareholders. Situation: Declining
profitability due to under performing wholly owned subsidiary 400 miles away;
managed part-time by the president’s son. Findings: Out
of state, unionized subsidiary
losing $100,000 per year. Top management depth
inadequate to effectively manage subsidiary. Parent’s facility 50%
underutilized. Parent facility could produce the subsidiary’s products at 16% less cost due to better manufacturing know-how, tooling, and plating capability. Parent company faced with need and cost to rebuild second line supervisory capability and marketing effectiveness. Parent could retain 50% or more of subsidiary’s sales. Action: Closed subsidiary. Results: Eliminated
$100,000 per year of losses. Retained majority of
subsidiary’s sales. Rebuilt 2nd
line supervisory level, and improved marketing effectiveness. Profitability increased
dramatically. Two years after closing
the subsidiary, the president repeatedly said “it was the best move the
company had ever made”. |