Increasing competition from old time suppliers of air-pollution control equipment.

Lecture 6B.Mini-Case KAVAG GmbH. Hitting
the Ground Runnind.5 points. Individual Effort
3 page max.
You have been appointed Geschaftsfuhrer of
KAVAG GmbH outside of Frankfurt, Germany, by the Vice President International
of a large US engineering/manufacturing corporation. KAVAG has been struggling
for years, mainly due to the neglect by the parent company. Morale is poor. The demand for oil and natural gas is
expanding, there are tighter air pollution control laws, and manufacturing
companies in Eastern Europe and the Central Asia countries (newly formed after
breaking with the Soviet Union) are looking for business.

Some of the factors that face KAVAG:
• Poor
morale in the engineering, sales and shop.
• Restrictive
laws that make it difficult to lay off employees.
• Increasing
competition from old time suppliers of air-pollution control equipment. In
addition companies in Eastern Europe, who have operated under a license from
Western European companies, and, with the expiration of the license, are now
direct competitors in the Common Market.
• The
parent company has assumed all of the debt and needs for working capital of
KAVAG, but they have tired of transferring funds on a monthly basis to make up
the negative cash flow. You do not have to worry about new sources of cash
(such as loans or capital), but you should be cognizant of the cash drain
through the operation part of the balance sheet.
• If
you do not solve the KAVAG problem, then you and the VP International should
up-date your resumes.
• The
new VP-International terminated the past Geschaftsfuhrer and promoted you as
the new manager. You started as an engineer at KAVAG and then transferred to
the UK subsidiary of the parent company, which specialized in gas scrubbers and
separators. You know all of the KAVAG employees.

Your assignment: Hitting the Ground
Running. Individual Effort.5 points.

What will do during Week #1? Respond to ‘Hitting the Ground Running’ to
these questions, and then proceed with the rest of the Mini-Case #3 at your own
pace. Label your response as “Hitting the Ground at KAVAG’. 5 points for
‘Hitting the Ground Running’.

•
Identify 5 topics that you will focus on within the first week.
•
Describe the areas that you will ask the CFO to identify for immediate
action.
•
What is going to be your priority in the various cost areas?
•
What balance sheet items interest you?
•
What is the status of the Cash Flow?
•
Your spouse has never been to Germany before and she wants to go on a
romantic cruise (with you) on the
Rhine (on Wednesday). How will you handle this?