Crisis at Renault Company - Assignment Example

1. What was the rationale for the Renault plant closure? For what other reasons might a company choose to close a plant? Renault is the second largest auto maker in France they announce to close their production plant in Vilvoorde, Belgium. The company’s decision will negatively affect the employees more than 3000 employees will loss their job. The companies decision is to transform the production of Vilvoorde plant to another plants of France and Spain. In this situation the company only need 1900 employees for continuing their production function. These decision is helps the company to save $ 160 million annually. One of the major reasons behind this is a powerful global competition in industries with substantial or extensive over capacity. The major reason existed behind the success of this plant is the consolidation of production at fewer plants. Renaults chairman said that the reason of sudden decision is to reduce the cost of production. The labor cost in Belgium is comparatively high. Higher social charges and tax rates make production in Belgium is more expensive comparing with Spain and France. There are lot of cultural problem behind the plant closure some employees is Vilvoorde says that the company discriminate them and the company’s decision is for save the jobs in France. The major reason for the elimination of plant is non fulfillment of its project feasibility. Every business is functioning with the aim of maximizing profit by minimizing the cost of production. At the time of setting up of a business a proper plan or forecast about the future business activity is under taken, but the expectation never equalize with the actual results. The variation in the budgeted and actual goal of enterprise may some times leads to make an end of the business function to some extent. Due to the non attainment of predetermined targets several business is going to take an inappropriate decision of turn off its business activities. 2. Who were the key stakeholders in the closure? How did their perspectives differ? The key stakeholders are the employees, Government, shareholders, customers, in the closure is employees there are more than 3000 employees they are in a threatening position to lose their job. “Stakeholders are defined as “individuals or organizations who stand to gain or lose from the success or failure of a system.” (Jonathan Boutlette 2004). Labor unions and politicians are against this decision of downsize the work force. The company’s decision to closure of Belgium plant and increase the production of French plant this news is create a positive results in the share price of Renault in Paris Bourse the share price increased 13%. Belgium is a country its economy is highly depends on the automobile industries there are more than 34,000 people employed in this industry, 15% of this countries export earning is contributed by this industry The Belgium government is another stakeholders, the Renault company’s decision to closure of their plant in Belgium is negatively affect the countries export earnings and the company’s decision will badly affect the auto industries of Belgium. The unemployment level in Belgium is around 13% as per the recent strategy. Society is another stakeholder, the sudden decision of Renaults plant closure is adversely effect the entire society also, due to the sudden increase of unemployment rate badly affect the society’s standard of living. The company’s sudden decision is arise lot of questions about their corporate responsibility among its stakeholders. 3. How was the closure announced? What would you have done differently? The closure was announced by Renault’s spokesperson they are planning to transfer the production at Vilvoorde to France and Spain. There are only 1900 employees need for over come the production of Vilvoorde. These announcements create lot of reactions in the politicians and community leaders and labor unions. During the time of declaration about the closure the company is running in profitable manner which turned out to be a shocky treatment among the workers. The Renaults decision make a serious issue in European economy. These decisions create a lot of questions about the future of European employment. These decisions also make certain problems of corporate responsibility to the society and to other stakeholders. 4. If you were implementing a plant closure in which products or services were to be transferred to another location, what would be the major components of your project? Try to list at least five categories of work. Consider HR tasks as well as operations and supply chain activities. After you make your list, assess the extent to which Renault seemed to have engaged in the activities you prescribe. When an organization plan to change their plant and they close their old plant this activity is highly relating with a strategic decision. The plant closure is not a easy job before planning the closure the company want to make a list of activities and set a time period for changing the plant. The major components of the project is relating with what are the activities done at the old plant. The company want to ensure that their proposed plant is suitable to manage these activities. Modern production function is relating with cost reduction and maximize the profit all manufacture are searching new locations for their production and reduce the cost. In this context change of a plant is relating with cost reduction and profit maximization. Another main thing in the location selection is the proximity to the production areas and marketing area this is relating with the logistic cost reduction. The big distance of production units and marketing areas are create lot of transportation expenses. The availability of raw materials are another main thing of changing a production unit. Before closing a unit an organization wants to find another potential area for their manufacturing activity. The main component of this project is proper replacement of human resources. Sudden decision of closing of plants are badly affect the employees of an organization. Loss of experienced and skilled labors is also create problems in an organization. In a closing of a plant all organization wants to ensure the availability of effective human capital. Sudden plant closure is create lot of social problems massive job loss create socio economic problems in a country. An organizations responsibility is to provide job opportunity to the society. Sudden plant closure decision creates job loss it is negatively affect organizations corporate responsibility and image. The major components of the project are to ensure the raw materials availability and ensure the workforce availability. Then an organization want to maintain their existing employees in their future operations. It is very important to utilize their employees in their new production plants. The list of works before closing a plant Find a proper location; this is very important before closing a plant the new location is suitable for easy marketing, distribution and other activities. Maintain the employees; the employees are the key factor of an organizations successful operation. Before changing the location all organization want to find suitable employees. Mainly the organization wants to provide job for their exisisting employees. Ensure the profitability of new location; production function is varies in deferent areas some areas it is more profitable some areas the production is not profitable. In this context before planning to closure of plants organization wants to ensure the profitability of new areas. Identify the socio economic and environmental condition of new location; some organizations change their production location from one country to another country before taking this decision the organization needs to identify the real socio economic and environmental situation of new country. Make a slow change; the sudden decision of plant closure and location changing is create lot of reactions in the society. Give time to the employees for finding a new job company take initiative to find the job. The HR tasks are mainly relating with job loss of one plant and another main task is the new employees are not experienced so the company needs more training and development programs to make the employees suitable for their operations. The Operational tasks are changing of plants are affect the whole supply chain and logistic activity of an organization. Ware houses and other facilities are located in near the production plant and transportation function also relating with the production plant. Before finding a new location for production an organization must ensure the transportation and other facilities. Renault is failed of their plant change it create lot of job loss their HR policy is not well and the company spend a huge amount of capital for modernizing the Vilvoorde plant in the year of 1995 after two year the closing of plant is a big loss for the company. 5. Make a list of at least five key performance indicators for evaluating the effectiveness of a plant closure. How did Renault fare on these measures at the time the case was written? What would you anticipate for the long term? The five key performance indicators are the following 1. Production output; it is measure on the number base how many units are producing in a day or week 2. Cost per unit; some old production units are very expensive unit production cost is some time low and some plants high 3. Employee turnover; 4. Capacity utilization; A plant has a capacity of production output the actual production is less than the capacity the performance is poor. 5. Incidence of defective products; it is one of the indicator of poor performance of a production plant defect products are create over expense and wastage of raw materials Renault fails to identify to measure the productivity of their plant the Vilvoorde plants performance is better and the plant shows a profitable results in the production function. 6. What would you have done differently if you had been on the Renault executive team responsible for this closure? Are there universal principles that may be applied to most plant closures of this type? Will they vary by geographic location? In the decision of Renault is a failure in this type of situation an organization want to maintain their production function by changing the production strategy. The plant is presently concentrate on production of automobiles for reducing the cost of production the company want to change their production system. Their HR policies also failure they want to retain their existing employees the sudden change is not ethical it loss lot of job opportunities. The company also want to give a time for their employees to find another job and slowly change the sudden decision is make problems to find another job. The main failure is the plant is performing well and the company invests a huge amount of capital for modernizing the plant in this situation the closing of plant will negatively effect their future goals and they spoil their resources. The sudden decision also create problems about the corporate responsibility to the society. Work Cited Boutelle, Jonathan. Understanding Organizational Stakeholders for Design Success. Who are the stakeholders and why they Matter. Boxes and arrows. 6 may. 2004. 29 May 2007 . Read More