Ace Automotive was a subsidiary of Spartan Industries, Inc., an automotive parts supplier. It was one of four divisions offering structural rubber products, automotive switches and electrical components, precision stampings, and automotive applications such as water pumps, fuel pumps, oil-filter adapters, and exotic brackets.
Spartan Industries purchased Ace Automotive in 1987. The former owner, Bruce McCullough, was the president of Ace and the manager of the St. Peters plant. Parts were cast and secondary metal-removal operations were performed at the St. Peters plant’s foundry and machine shop. The plant also had an assembly area where purchased materials were combined to create finished products.
Ace Automotive’s business of supplying automotive OEMs was profitable because it had a strong customer base among the dominant domestic automakers.
However, the fierce foreign competition had emerged, setting new performance standards. Japanese automakers had established “transplant” assembly plants in the United States, allowing the US auto industry to compete on price. This, in turn, had resulted in dramatic changes by domestic automakers, such as workforce reductions, the implementation of cost-cutting systems, quality improvement, and the acceleration of new design introductions to the market. Domestic OEMs began to look to suppliers as a source of improvement as costs were reduced and quality and product designs improved.
The St. Peters plant, which opened in 1975, covered an area of 125,000 square feet. It had 9 die-casting machines ranging in capacity from 400 to 1,000 tonnes. For use in the presses, each casting required its die. Large blocks of special steel were used to make the dies, which had cavities carved into them to form the shape of the part to be cast. Not all dies could fit in all presses, but a die could generally operate in a variety of press sizes.
General Motors was Ace’s biggest current customer, and they were planning to add a new engine, the “high-value 6,” to their power-train lineup. Ace had received a request for a quote (RFQ) from General Motors’ Chevrolet-Pontiac-Canada (CPC) Group to supply water pumps for the HV6. The RFQ stated that 140,000 pumps would be needed for the 1992 model year. Winning the high-value water-pump contract required committing to supply at least 140,000 units, though fewer units may be purchased.
McCullough went over the preliminary quote package that the manufacturing, marketing, and engineering departments of General Motors had prepared. According to the cost breakdown, the total manufacturing cost was $13.81 per unit (based on 140,000 units using the existing foundry capacity). However, because the foundry was already at full capacity, Ace needed to focus on increasing capacity to win the contract. The machine-shop expansion was nearly finished, and McCullough now had to deal with capacity constraints in the foundry. He hoped to expand the foundry someday, but he needed to focus on a more pressing matter: by the end of the day, he needed to complete an important sales quotation.
In conclusion, Ace Automotive was a division of Spartan Industries, Inc., which supplied automotive parts. The St. Peters plant had a foundry and machine shop where parts were cast and secondary metal-removal operations were performed. Ace’s largest customer was General Motors had issued an RFP for water pumps for the HV6. Winning the high-value water-pump contract required committing to supplying at least 140,000 units. With the foundry already operating at full capacity, Ace needed to concentrate on increasing capacity to win the contract.
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