April 25, 2006

RESTRUCTURING & DOWNSIZING

Part 9 of 9

White Collar vs. Blue Collar

For those studying to be manager, the heart wrenching effects of corporate restructuring are not felt. Unless one has day-to-day contact with the companies labor force, the names are more that likely to be viewed upon as assets. Unlike machines that can be disposed off with out a second thought, letting go of a worker has much greater effects on the community. A dramatic change as the automotive industry has under taken will not only hurt communities with the loss of income, but possibly the increase of crimes as a matter of survival.
To be the best managers we can be, we have to keep reminding our selves that thousands of people rely on us to make good decisions, and trust in us to keep the company afloat. Granted there are times when things turned for the worse quiet unexpectedly, but unless we are managing a company without some kind of safety net, our poor decisions will cost thousands of jobs. And that is a ton to carry by your conscious.

April 23, 2006

RESTRUCTURING & DOWNSIZING

Part 8 of 9

Delphi

Whenever large corporations experience downturns, the ripple effect is felt by their suppliers. The case is the same with the auto manufacturers and their suppliers. Delphi Corp. a major parts supplier to GM has filed for Chapter 11 Bankruptcy. It is asking the courts to reject unprofitable contracts with GM. Delphi Corp will also sell or close 21 of its 29 facilities. Additionally it will buy out 17,000 unionized workers to continue with its drastic downsizing. As drastic as it might be, the company is looking towards the future. The loss of a company that does not recover is much greater than jobs, that hopefully will be regained in the future.
To read more about Delphi Corp. read...

http://detnews.com/apps/pbcs.dll/article?AID=/20060401/AUTO01/604010302/-1/ARCHIVE

April 22, 2006

RESTRUCTURING & DOWNSIZING

Part 7 of 9

GM & Ford

Last year the automotive industry suffered losses the billions of dollars. In order to survive, and avoid bankruptcy, Detroits Top 3 (GM, Ford, & Chrysler) adopted extensive downsizing and restructuring plans.


Through out the country and its many plants around the world, GM and Ford alike cut tens of thousands jobs. Additionlly closing manufacturing plants, reducing production capacities. All essential to cover loses, and ever increasing health care cost to retired workers.

It now seems these programs are slightly paying off. GM's rating has been raised and its stocks have rose 8%. It is a good sign however, GM still has much work to do before it rebuilds is powerhouse. With Toyota increasing market share, GM is more than likely going to be dethrowned as the number one car manufacturer.
For more on GM's recent improvements read:
http://www.chicagotribune.com/business/chi-0604270218apr27,1,5507020.story?coll=chi-business-hed

April 21, 2006

RESTRUCTURING & DOWNSIZING

Part 6 of 9

Operational Restructuring

Operational restructuring, is the process of increasing the economic viability of the underlying business model. Examples include mergers, the sale of divisions or abandonment of product lines, or cost-cutting measures such as closing down unprofitable facilities.
In most turnarounds and bankruptcy situations, both financial and operational restructuring must occur simultaneously to save the business.

In recent months the Automotive Top 3 (GM, Ford, & Chrysler) have been forced to restrcuture due to poor market performance and heavy fixed retirement costs. The changes made will also have great affect on other industries and markets that rely car manufacturers.
Some recent new:
Ford
http://www.autoindustry.co.uk/news/06-04-06_5
GM
http://www.autoindustry.co.uk/news/21-04-06

Goodyear
http://www.autoindustry.co.uk/news/07-04-06_9

Prof. Ian H. Giddy, New York University

April 20, 2006

RESTRUCTURING & DOWNSIZING

Part 5 of 9

Financial Restructuring

Financial Restructuring is the reorganiztion in the capital structure of the firm. An example of financial restructuring would be to add debt to lower the corporation's overall cost of capital. More often firms restructure debt rescheduling or equity-for-debt swaps based on the strength of the firm.A recent example of financial restructuring would be the Eurotunnel requesting more time to repay its debt. In oder to do this the original agreement has to be refinanced.
To read more visit about the Eurotunnel visit:

http://www.manchesteronline.co.uk/men/business/s/211/211720_eurotunnel_given_more_time_over_debt_payments.html

Financial restructuring involves restructuring the assets and liabilities of corporations, including debt-to-equity structures, in line with cash-flow needs to promote efficiency, support growth, and maximize the value to shareholders, creditors and other stakeholders.Financial restructuring at times requires refinancing at every level of capital structure


Work Cited
Prof. Ian H. Giddy, New York University

April 19, 2006

RESTRUCTURING & DOWNSIZING

Part 4 of 9


Portfolio Restructuring

According to Forbes.com, Portfolio Restructuring is the reconstruction of a portfolio asset mix by selling off undesired assets (for example: equities, debt, or cash) or securities. And buying desired assets and/or securities to maintain a profitable asset portfolio.

Good examples are corporations with multiple brands, for example Procter & Gamble and Colgate-Palmolive. Although these companies started of as single product companies, over the years they have expanded and acquired other businesses. To provide more products with the same quality and performance consumers have been used to originally. Proctor & Gamble earlier this year has acquired Gillette and will continue to use the name due to its branding power. It is an asset the increases the value of P&G product portfolio.

March 28, 2006

RESTRUCTURING & DOWNSIZING

PART 3 of 9

DOWNSIZING

In an ideal world businesses would continue to grow and create shareholder value. However, in the limited resource world we live in, companies rise and fall. Some giants fall due to poor management decisions, as with recent downsizing within the motor industry, or due to uncontrollable social and environmental disasters.

Companies downsize to cut cost, improve efficiency and to maintain a profit level acceptable to their shareholders. Downsizing is the deliberate decision to reduce the work force that is needed to run the current size of the business. Layoffs are a part of a larger plan, where organizations analyze their core business and develop their business to its fullest extent.

There are two types of downsizing.
Proactive is a restructuring strategy of an organization to obtain efficiency and market share.
Reactive, where the downsizing occurs because of deep financial trouble within the organization.

Downsizing occurs because of an intentional decision to reduce personnel. Commonly disproportionately in the management ranks, reestablishing efficiency and/or effectiveness objectives. The main theme of downsizing is to lower operating expenses by employee elimination to show a greater profit for the company.

The organization’s prerequisite to downsizing is attributed to cost efficiency, greater control and to develop a company that is able to react to a changing market within a short period of time.