Icf Corporation Midway Division

Executive Summary

ICF Corporation, a major automotive part manufacturer, has been struggling with the recent deteriorating situation in the automotive markets in North America and considering terminating the money-losing Midway division to improve its profitability. In response to the company’s concerns, our Midway division has established a target for improvement in sales and a minimum return on sales of 5%. However, the market situation in 2005 is expected to erode the profitability with severe market competition and ensuing depressed prices.

Given the limited capacity to manufacture, we are in a situation in which we have to decide how to improve our performance and make profit in 2009. Recently two companies have approached our division; Maxim Company offered to supply a maximum of 40,000 units of FST-2000 and Haiping Automotive asked the division to produce a one-time order of 25,000 units of FDT-3000. Therefore, the newly developed situation urges us to investigate the related issues and advise the company’s management on the optimal course of action the company should follow.

Our division has identified four key criteria to analyze implications of different alternatives and arrive at the best recommendation. These criteria are profit maximization, product diversification, market share, capacity utilization, and employee retention. Among these, profit maximization has been selected as the single most important criterion on which our recommendation should be made.

The financial impacts of maintaining the status quo and closing down the division have been scrutinized through breakeven analysis and sensitivity analysis in the Analysis section of this report. Also, another sensitivity analysis has been performed in an attempt to determine viable combinations of in-house production and outsourcing of FST-2000. Finally, implications of manufacturing FDT-3000 have been reviewed in relation to outsourcing the production of FST-2000 to look at...