The pharmaceutical industry went through many changes in the 1990s and the early 21st century. The United States-Mexico-Canada Agreement (USMCA) made a significant impact on Canadian manufacturing. The trade barriers were removed, and the company began to question whether it was cost-effective to keep manufacturing products in Canada with higher labor costs and much higher taxes. In addition, the 245 acres of land at which the facility was located was near a prime residential area and within a mile of Lake Ontario just outside of Toronto. The land alone was worth over $7,000,000.
Analyze whether the company should continue manufacturing in Canada or whether it should move back to the United States. This requires research into transportation cost estimates from Colorado to Toronto. It also requires analyzing the impact on company image by shutting down a facility in Canada.
Draft a 5–7-page recommendation to management.
Include the following in your recommendation:
- Estimated financial and nonfinancial costs and benefits of shutting down the Canadian facility or keeping it open
- A 12-month-based action plan
Key Points:
Shutdown Costs
– Employees (retaining, career counseling, and severance pay)
– Facility Shutdown Costs (environmental Impacts and Dismantling)
– Additional Transportation Costs
Image Issues
– Impact on company Image
– Potential impact on sales by not having a local presence
Benefits
– Sale of land, buildings, and equipment
– Reduced long term labor costs
– Reduced maintenance costs
– Reduced taxes and accounting costs
– Improved equipment and labor utilization in Colorado location