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Chassis & Frames Co., image, image, image, image, image, image, image,…
Chassis & Frames Co.
Case Overview
Company Information
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Two main Business units: the manufacture of 1. chassis and 2. bodywork for SUV and Pick-Ups type vehicles
Main clients are Ford, GM and Honda
Representative company in the production of chassis and bodies in the automotive industry production chain
Business in Mexico
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Opportunity: establish a manufacturing plant of chassis and bodywork for SUV-type vehicles in San Luis Potosí to sell to GM
Prompt investment decision: Detroit Corporate requires to 1.Make the Financial Plan for the next 3 years, and 2.Make the general financing decision for the company and the project in SLP
Considerations: Paralysis of global car production and distribution chain by plants closure due to COVID 19 pandemic
Overall Considerations
Head office of Production, Finance, Logistics and Marketing will determine the amount to invest in the capital budget
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Three years of the financial plain in SLP
- only fixed asset investment will be made
- consider investment in working capital
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Finance Considerations
Sales
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GM plant in SLP: 40% of the production (sales in MX pesos)
Detroit plant: 60% of the production (sales in US dollars)
[required to verify the logistics]
Accounts payable and receivable period: average of the last 3 years as objective (for both the project evaluation and financial plan)
Promotion and sales costs, administrative and operating expenses: kept in proportion to sales and considering new sales from the SLP expansion
Legal
Suppliers of materials, supplies and raw materials: from Mexico guaranteeing the regional content on the T-MEC
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Land construction
Land for the plant construction:
- rented for the first 10 years
- acquired from the initial phase of the project
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Construction of the plant: estimated time around 15 months
(including permitting and response time for the Environmental Impact Manifesto)
Financing
Bank Loan 40% of the initial investment, 8% rate
Parent company contribution 60% of the initial investment, 25% return
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