Being a CPA and a turnaround/crisis manager, I have witnessed many companies who have taken manufacturing in house on the assumption that they can pick up additional margin. Sometimes this happens, sometimes not. I have not seen any release from Prst as to why they are building there own plant, so any thoughts would be speculation. The downside to doing your own production comes from the loss of ability to fix your costs in a contract and better control your inventory.
Time will tell.Given Pressteks anticipated volumns, the margins an outside source can obtain should be minimal if PRST management id doing there job.
The plant in my mind is both an opportunity for PRST and a risk. Remember, owning your own plant greatly increases fixed costs, especially if the economy were to slow. Outsourcing, which GE and other companies use extensively, minimize the impacts of market swings by eliminating these fixed costs.
The other problem, especially in the competitive market Prst is in, is owning your own plant weds you to the technology of the equipment purchased, where as competitive bidding with outsourcing enables companies to find the low cost producer.
PRST challenges are massive, managing growth, and ultimatly facing comptetition from other plate makers, one or both of these will likely begin to squeeze profits.
Time will tell. |
