The New Customer Decision - Farina

Introduction:

The company was founded in 1930 named as ¡§Farina¡¨ by Battista ¡§Pinin¡¨ Farina. It is specialized in design and production of custom and small series automobile. After the death of Farina in 1966, name of business was changed to ¡§Pininfarina¡¨. In 1979 it split its design and manufacture divisions into Pininfarina Studi E Ricerche and Industrie Pininfarina (IPF). Pininfarina was considered a niche car manufacturer. Production volume ranged from only one or two cars per day. For special ¡§sedans¡¨ such as Fiat Coupe it was about 50 to 60 cars per day.

In 1992, there was a crisis of rapidly phasing out of the production of bodies and assembling. So there was a need to find major customers in order

„h to utilize the extra capacity created by productivity improvements.

„h to leverage the newly achieved production skill.

„h to diversify the risk of lower future volumes from current customers.

Now, in 1996, Mitsubishi proposed to adapt and design and manufacture one of their sport utility vehicles, the Mini Pajero for all of Europe.

The various requirements of the proposal were:

„h The major design work of adding a left-hand drive model and adapt the process design to its capabilities.

„h Production rate of about 150 vehicles per day.

„h Payment of a standard margin on a target cost.

„h Total investment of about 300 bn Lira was required.

„h Process will be design by Mitsubishi.

„h New production facilities would have to be acquired and equipped for Mitsubishi production.

„h Additional expenses related to the paint shop which would have to run for additional shift.

„h Mitsubishi might demand the defect level to be .th of current customers

„h Major mechanical parts like engines would be supplied by the production in Japan either from Mitsubushi itself or from one of its suppliers.

„h Mitsubushi agreed to own the inventory until it arrived at Pininfarina.

„h 600 additional Direct Workers will be needed.

Analysis:

There were some favorable points and unfavorable points for accepting the proposal.

Favorable Points:

„h It will be a Learning Opportunity for Pininfarina.

„h It will