WAC Submission 5

Cooper Fabrics Ltd.

[Type the author name]

[Year]

Situational Analysis: The case talks about Cooper Fabrics which was founded in the year 1950. It was formed to engage in the manufacturing of automotive and speciality household fabrics. It had 3 plants one at Parville and other two at Rhode Island).The general manager of the company was Mr. Ralph Hampton and Mr. William Rauls was the quality controller. The working condition of company was good. During the initial years of its inception (1950 1953) company was running into losses due to low income, higher cost, low sales and renovation and reorganisation. There were increased sales in 1953 but even then operated at a loss. However during this time the employment rose to around 300. By 1954 the company started making small profits. Financial Statements: Analysis of the Fund flow Statement Inflows Jan'51 Cash A/C Receivable Advances Stocks(Inventory) Net Plant Prepaid Expenses 225 251 3 1782 1075 45 Jan'54 23 148 0 592 307 16 Net 202 103 3 1190 768 29 2295
Outflows Jan'51 A/C Payable Accruals Contracts Employee Deposits Tax Bank Notes Deferred Income Notes to shareholders Paid in surplus Earned deficit 396 85 22 32 89 500 17 1500 21 -509 Jan'54 120 41 0 11 17 0 0 800 224 -1355 Net 276 44 22 21 72 500 17 700 -203 846 2295

Company has been generating money by getting rid of old inventory and machines which are not being used. The money which was generated had been used in 1) Paying of the bank notes of $500,000 2) Shareholders funds $700,000 3) Accumulated losses to the tune of $846,000. If we notice the movement of money of the company between Jan 54 and June 54 it is clearly visible that there is a better situation in accounts receivables, payables and inventory which tells us that business is now doing better. The Gross fixed asset has also increased and hence Assets are also bought.

Outflows

Inflows Jan'54 Cash A/C Receivable Advances Stocks(Inventory) Net Plant Prepaid Expenses 23 148 0 592 307 16 Jun'54 18 179 0 627 363 Net 5 -31 0 -35 -56 16 -101
A/C Payable Accruals Contracts Employee Deposits Tax Bank Notes Deferred Income Notes to shareholders Paid in surplus Earned deficit

Jan'54 120 41 0 11 17 0 0 800 224 -1355

Jun'54 152 80 0 0 0 0 0 800 224 -1287

Net -32 -39 0 11 17 0 0 0 0 -68 -111

So contradicting to what the case tries to show that the company is employee friendly, if we see a little clearly the company is earning profits by paying lower wages and is still thinking of not giving them this wage raise. If we go into more details about the employee relations the hourly wage rates were quite low, incentives were not given to battery hands. The company has also demanded that employees be at their work stations before the shift time starts and leave only after. Another harsh move by the company towards the worker union was when they changed the rule and now could dismiss workers up to 60 days. The company had recently implemented lower working hours (1954), especially in the second and third shifts which further reduced the workmen s wages. The company has been taking advantage of the current market situation to reduce wages as well. Objective: y y y To convince employees that price hike is not possible To earn more profits To make the Employees realise that the management is thinking about employees and wants good employee relations

Problem Statement: y To convince employees to continue working without hike in wages.

Alternatives: 1) Send the letter stating that price hike is not possible even though profits have started coming 2) Don t send the letter and give a wage hike 3) Give rating system and small bonuses to the employees

4) Share incentives with the employees which they will get if they work for the company for a stipulated number of years Evaluation of Alternatives: 1) The company has controlled its operational cost to a great extend. But reducing the fixed cost now does not seem to be possible anymore. The company still a has to pay the shareholders funds. So if they increase wages then the payment will have to wait further. Moreover giving a hike to about 340 workers would mean a lot of money and we still don t know how much would be the wage hike demanded. 2) The company could also think about giving a wage hike so that the workers are happy and satisfied to work for Cooper Fabrics Ltd. But it has to be noted that employees might even take this initiative of the company as something which had to be done by the company and not as a big development. 3) The company could also start a rating system for the employees. In this way they could give bonuses to the workers who are on time and are not absent. This would help the company in getting the workers on time for their job and even reduce the amount of money the management would have to part with. The only problem with this alternative is that there should not be any fights within the employees. 4) Give wage hike to the workers who have been in the same company for some stipulated amount of time. This would help in making employees loyal.

Implementation Plan: I feel the company should go for plan 1 and 3. In this way the company s objective of not giving a wage hike without hurting the sentiments of the employees would be possible. I feel that the General Manager of the company should talk to the employees as to why the management cannot give a hike to everyone. Be honest in admitting that the company has returned to profits, but needs to repay old debts. Instead of sending out a letter Plan B The managements aim for buying the Parville plant was to earn profits from the plant. If the workers do not listen to the management and ask for wage hike, the management should sell out the business and get back more than they invested as the plant is working on profits right now.