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Introduction
Industry
Precision Machine Tool is a machine tool company that primarily manufactures for the automobile industry. The machine tool industry is self-sufficient in that they use their resources to manufacture products; that is, they use their own tools. Precision Machine tool uses big machines to build parts for lathes, which are sold in the automobile industry for use in factories. Precision has always had a reputation of quality, though it has declined because of aging technology and machines. The aging of the technology is because of a decline in their capital caused by a recession in the automotive industry.
During the late 1970s, the American automotive industry was at its apex. Americans fell behind during this boom because of inadequate production capacity. The Japanese had identified the machine industry as a growing industry and invested in modernization of technology. Consequently, Japanese technology was better and costs were lower. When a recession hit in 1980-1981, American firms had little capital to invest, and thus could not modernize their equipment. The industries that are going to survive in the future are those that have the most efficient computerized operations and that produce the cheapest, most reliable products. The Japanese have this edge and the American machine tool manufacturers are reluctant to change their ideologies of buying only American made products.
John Garner and Tom Avery created precision Machine Tool. John Garner is the president of Precision Machine Tool, and is a financial conservative. He prefers to invest in the company using only its profits. Tom Avery is an expert tool design engineer. He is in charge of the manufacturing and management end of the business. Both men are very critical of selling out to the Japanese and want to keep Precision American.
Equipment
One of the main problems plaguing Precision is the aging of its technology and equipment. Precision had little or no capital after the recession to invest in new equipment. Sixty percent of its equipment is outdated, some over twenty years. These old machines lack quality and because of this lack, Precision is losing orders. To try to stop this slide in quality, Precision purchased a new machine from the Suzuki corporation. But even with the new machine, Precision?s costs are higher and quality is lower. This causes profits to be lost which causes employment to be affected. Precision?s employment is down twenty-two percent, and with little or no chance of quality improving, these numbers are in danger of dropping even more.
Foreign Competition
Precision also has to deal with an increase in foreign competition. During the recession, Japan had noticed a potential for growth in the automotive industry and had invested in modernization. Now they have the technology and equipment necessary to keep up with quality and price demands. With the voluntary quota system now expired, Japan is looking to increase its amount of exports to the United States.
Japanese goods are cheaper and of better quality and domestic firms cannot compete with them. Many domestic firms had been forced to become subsidiaries of Japanese firms, basically becoming distributors for Japanese products. Japan had also occasionally acquired domestic firms. This Japanese plan to acquire US firms is the current dilemma of Precision Machine Tool.
Current Dilemma
Mr. Ako Wang with Suzuki Machines has just contacted the owners of Precision Machine Tool, and an offer has been made by the Japanese to buy. Garner and Avery are now forced to take a hard look at the situation that Precision is in. Precision?s machines are aging; sixty percent of the machines are old, some twenty years or more. Their sales are down thirty percent; orders are rejected because of a lack of quality and high production costs. Employment at Precision has also been hit hard, down twenty-two percent. Precision is not able to compete with foreign imports in price, nor in quality. This, of course, is because they have remained victims of the automotive industry recession. Garner and Avery have to make an educated decision as to what is best for Precision in the present and future.
Problems
Foreign competition and foreign technologies pose a serious threat both to the machine tool industry in the US and to the future of domestic manufacturing. Within Precision Machine Tool, there are several issues that need to be addressed in order for the company to continue. Precision has to modify its current attitudes and behaviors in order to remain in the automotive tool industry.
Personal Issues
Precision?s owners have an attitude of ethnocentrism?they want the company to remain American. They refuse to work with the Japanese or sell out to the Japanese. Garner and Avery stated that they would rather go bankrupt than give in. They have already been forced to buy one Japanese machine; a major decision against their personal beliefs.
Both men feel that American technology is superior to Japanese technology. They are not willing to compromise and work with the Japanese to better Precision. They are resistant to changing their personal attitudes against foreign manufacturing. They realize that they cannot remain in the situation that they are in now, yet they do not want to make any drastic changes. They no longer are thinking about what is best for the company in a financial sense. They are allowing their emotions to control their decisions.
Economic Issues
Garner and Avery also have to deal with the issue of economics. Precision Tools is having a great deal of trouble keeping up with the Japanese industry. Precision no longer fits in with the current needs of the automotive industry. They no longer fit in with the current automotive environment. Automotive industries will not
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