(Technology acquisition) General Motors recently announced that it was preparing to invest $850 million to update its metal-stamping operations. The new metal¬ stamping operations will be more flexible and less labor intense. GM’s Metal Fabricating Division is expecting to reduce employment of hourly workers by 30,000 and salaried workers by 4,000.

Much of the neve investment will be spent on modern transfer presses. Unlike some of GM's older presses, such units can accept different dies, or forms for shaping sheet metal. As Japanese auto makers have proved, such flexible machinery is much more efficient, because it allows an auto maker to alter its production mix to match what's selling and to compensate for breakdowns.

a. Assume that the only justification for upgrading the metal-stamping machin¬ ery is the labor costs to be saved; also, assume the average pay of the 34,000 workers to be displaced by the upgraded machinery is $25,000. Compute the payback period for the upgrade project (ignore tax).

b. The two major financial dimensions of the upgrade project that are men¬ tioned in the news article are the initial cost of $850 million and the labor cost savings. Prepare a brief oral report in which you identify other cost savings and other costs of the upgrade project.