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Fonderia Del Piemonte S.P.A. Case Solution & Answer

Fonderia Del Piemonte S.P.A. Case Solution

I.Summary

Fonderia del Piemonte S.p.A company is managed by the Martin Bellucci since November 2015, and is in the view of acquiring the new automated machine for molding named as Thor MM-9, which seems to be helpful in the molding of the sands into which molten iron would be transferred to get the castings of the iron. This machine would not just be a substitute of an older machine of the company but would also have better efficiency and quality. As per the previous scenarios, the similar machine was rejected by the company’s board of the directors due to the some economic crises, but now they offered a proposal of the expense on the company’s machine, which is nearly around EUR2 million, but in order to have a successful expansion of the business through the operational benefits provided by the machine; the company should first evaluate whether the investment in machine would be beneficial for the company or not, and if it would be beneficial then the company must device an efficient and meticulous plan to execute the investment for the expansion purpose.

Problem:The problem in the case is regarding the introduction of the new machine for the company’s operations, as the machine is higher in cost but has the potential to provide extra benefits to the company, but there is an obstacle in making the final decision regarding whether to implement the machine or not, because the company would have to lay off the labors, due to which, there would be conflicts between the company and the labor union. Moreover, the new machine takes larger place and is thrice the cost of the older machine.

Recommendations:The new machine named Thor-MM3 is quite favorable for the company as it provides high productivity in comparison to the older machines, and it can give tax benefit to the company because of its high depreciation. The other benefit is positive NPV, which comes after the implementation of new machine, which will increase the company’s growth opportunities.

II. Identification of Key Problems and Questions

The problems which has taken place in the company is regarding the implementation of new machine, known as: Thor- MM-9, which can improve the product’s quality and can also decrease the human labor, butare some factors due to which the Bellucci(owner) is in dilemma that whether he should take the decision of implementing new machine or not.

There are certain problem causing issues, which need to be solved in this case:

  1. The company has to improve its growth, for which it needs proper machinery and equipment.
  2. The new machinery is comparably efficient, but it reduces the labors which can cause conflicts between the company and the labor union.
  3. How can the old machine be replaced if the new one is quite expensive

Less considerable issues

The main problem in this case is about the company’s productivity and the execution of new machinery, which the company should consider so that it could make a rational decision for it’s the growth and expansion. There are some less issues but needs consideration, such as:

  • The new machine is productive but very expensive (1.9 million).
  • The new machine has no salvage value.
  • The machine can reduce the labor, which can provide cost effective strategy to the company……………………..
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