Problem:
To cope with the high demand in the body shop, the president and general manager of West End Motor, W.B. Wilson, was considering investing on a land space for a new body shop. Although West End Motors was a franchised dealership, this project would not receive financial support from headquarters. Hence, investment decisions must be analyzed thoroughly using tools such as: NPV, IRR and graphical illustrations.
In the old body shop, there was insufficient storage space for parts, supplies and damaged vehicles. The five working stalls were located in the body shop, one mile away from the main dealership which included two preparation stalls and a paint booth. This separation created much inconvenience and inefficiency in the overall operations. Furthermore, current working conditions were poor characterized by poor air conditioning and congested working areas. As consultants, we suspect that the limited working space has contributed to high stress levels which in turn increase the turnover rate.
Alternatives:
West End Motor could consider alternate investment projects such as acquiring the small independent shops, merging with the larger franchised dealer or renovating the old body shop. All of the above could achieve management’s goals such as improving the public image of the body shop and creating a pleasant environment to attract more customers. However, costing information related to the above projects is uncertain and further analysis must be conducted to compare the profitability among them. If financial support was insufficient, maintaining the status quo may be the best option since the body shop could generate a steady flow of revenue to cover existing cost ...