Automotive Interiors (AI) is a U.S. company that manufactures seats for automobiles, vans, trucks, and boats. The company has a number of plants, including the Woodstock Cover Plant, which makes seat covers. The company has recently been experiencing financial difficulty and is in breach of certain financial covenants on its loan facilities. The company is currently engaged in an out of court loan workout process with its lenders. Operational restructuring is high on the agenda of lenders. The Chief Restructuring Officer (CRO) has been made aware of the following development at AI's Woodstock Cover Plant: Bill Rice is the plant manager at the Woodstock Cover Plant but also serves as the regional production manager for the company. His budget as the regional manager is charged to the Woodstock plant. Rice has just heard that AI has received a bid from an outside vendor from Asia to supply the equivalent of the entire annual output of the Woodstock Cover Plant for $42 million. Rice was astonished at the low outside bid because the budget for the plant's operating costs for the coming year was set at $48.6 million. If this bid is accepted, the Woodstock operation will be closed down. The budget for the Woodstock Cover Plant's operating costs for the coming year is presented below: Materials Labour $16,000000 irect $13400000 Plant manage Corporate expenses nd staff.... 1200000 3,00000 600000 Expense for Rice and his regonal staff Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary cost The following are additional facts regarding the plant's operations: Due to the plant's commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders were cancelled as a consequence of the plant closing, termination charges would amount to 25% of the cost of direct materials. Approximately 350 employees would lose their jobs if the plant were closed. This includes all of the direct laborers and supervisors; management and staff, and the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some of these workers would have difficulty finding new jobs. Nearly all of the production workers would have difficulty matching the plant's base pay of $12.50 per hour, which is the highest in the area. A clause in the plant's contract with the union may help some employees; the company must provide employment assistance and job training to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.6 million. Some employees would probably choose early retirement because AI has an excellent pension plan. In fact, $1.4 million of the annual pension expenditures would continue whether the plant is open or not. a. b. c. Automotive Interiors (AI) is a U.S. company that manufactures seats for automobiles, vans, trucks, and boats. The company has a number of plants, including the Woodstock Cover Plant, which makes seat covers. The company has recently been experiencing financial difficulty and is in breach of certain financial covenants on its loan facilities. The company is currently engaged in an out of court loan workout process with its lenders. Operational restructuring is high on the agenda of lenders. The Chief Restructuring Officer (CRO) has been made aware of the following development at AI's Woodstock Cover Plant: Bill Rice is the plant manager at the Woodstock Cover Plant but also serves as the regional production manager for the company. His budget as the regional manager is charged to the Woodstock plant. Rice has just heard that AI has received a bid from an outside vendor from Asia to supply the equivalent of the entire annual output of the Woodstock Cover Plant for $42 million. Rice was astonished at the low outside bid because the budget for the plant's operating costs for the coming year was set at $48.6 million. If this bid is accepted, the Woodstock operation will be closed down. The budget for the Woodstock Cover Plant's operating costs for the coming year is presented below: Materials Labour $16,000000 irect $13400000 Plant manage Corporate expenses nd staff.... 1200000 3,00000 600000 Expense for Rice and his regonal staff Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary cost The following are additional facts regarding the plant's operations: Due to the plant's commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders were cancelled as a consequence of the plant closing, termination charges would amount to 25% of the cost of direct materials. Approximately 350 employees would lose their jobs if the plant were closed. This includes all of the direct laborers and supervisors; management and staff, and the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some of these workers would have difficulty finding new jobs. Nearly all of the production workers would have difficulty matching the plant's base pay of $12.50 per hour, which is the highest in the area. A clause in the plant's contract with the union may help some employees; the company must provide employment assistance and job training to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.6 million. Some employees would probably choose early retirement because AI has an excellent pension plan. In fact, $1.4 million of the annual pension expenditures would continue whether the plant is open or not. a. b. c