Operational matters – North Plympton Sample Clauses

Operational matters – North Plympton. The following summarises key findings from KPMG Forensic’s review of North Plympton’s activities in the period leading up to the appointment of the Administrators. North Plympton primarily manufactures alloy wheels, swing arms and hubs for Harley Davidson and oil pans and cylinder heads for Holden. The plant has been operating since 1953 and is facing significant environmental issues. At the end of 2003, it appears that the board of ION Limited and management at North Plympton and the ION Consolidated Group Head Office were aware that the plant had been performing poorly for some time. Despite a poor accounting system, plant management suspected that the plant had been making a loss on components supplied to Harley Davidson. Nonetheless, a new agreement reached with Harley Davidson in 2003 required the North Plympton operations to deliver a price reduction of 8.6% in year one followed by year on year reductions of 3% until 2010. The plant at North Plympton was without a plant financial controller for much of the 2003/04 financial year, including the period when the forecasts were prepared for the April Statement. Xx Xxxxxxxx, the plant General Manager, was based in New Zealand but had responsibility for North Plympton in addition to the ION NZ operations and the ION US operations which he said was difficult for him to cover adequately. Over the course of 2004 the plant’s operating performance worsened – the principal cause being inadequate planning, poor production processes and air freight expenses. These were caused by the following: ▪ insufficient plant management oversight and operational planning; ▪ the age and state of the plant and the low morale of staff; ▪ poor financial controls and an unreliable standard costing system; ▪ scheduling of preventative maintenance such that high labour overtime was incurred to meet production targets to overcome high machine maintenance downtime rates; ▪ the decision in January 2004 to make approximately 100 staff redundant, followed two months later by another decision to transfer production from Xxxxxxxxx to North Plympton. This gave rise to a lack of maintenance and engineering support at North Plympton causing the Harley Davidson production to fall behind. To meet contractual obligations to Harley Davidson, goods were air freighted instead of shipped to the US at a cost of $600,000 per month compared to $50,000 per month previously. This increased cost was in the context of a monthly profit forecast of $880,000 ...