Investment analysis of a new paint shop in automotive industry

• Main Author: Osman, Hamizan
• Format: Thesis
• Language: English; English
• Published: UTeM 2018
• Subjects: T Technology (General); TL Motor vehicles. Aeronautics. Astronautics
• Online Access: http://eprints.utem.edu.my/id/eprint/23451/1/Investment%20Analysis%20Of%20A%20New%20Paint%20Shop%20In%20Automotive%20Industry%20-%20Hamizan%20Osman%20-%2024%20Pages.pdf; http://eprints.utem.edu.my/id/eprint/23451/2/Investment%20analysis%20of%20a%20new%20paint%20shop%20in%20automotive%20industry.pdf; http://eprints.utem.edu.my/id/eprint/23451/; https://plh.utem.edu.my/cgi-bin/koha/opac-detail.pl?biblionumber=112837

National Automotive Policy stated by year 2020, the automotive industry will provide 550,000 employment opportunities with involvement of 430 local vendors. In NAP 2014, government has given special emphasis on export of local production cars and increase localisation of automotive component. With the annual export target of 250,000 units, the quality of painting job in the manufacturing process must be at global standard and able to withstand the extended warranty of minimum 5 years. Paint shop, one of the important components in automotive industries is an essential process in automotive manufacturing. Comparable to Germans’ marque car, painting shop in Malaysia is not able to match with the quality standard and process specification due to inferior technology. It demands high quality result which may lead to adverse impact to environment and human safety. As such the selections of process and technology level are crucial to determine the level of quality, environment, and safety to workforce. All these aspects will directly give an impact to initial capital investment of the company. This thesis examines two alternatives faced by decision maker whether to maintain the current technology or to pursue new technology (challenger). Two approaches of study were employed i.e. the first one was a combination of team assessor where experts were invited to provide opinion, and benchmarking of available facilities. The second approach used is Investment Analysis (IA). IA test the robustness of the results of an intended investment in the presence of uncertainty. It was a combination of feasibility study where the challenger was assessed through financial analysis such as Net Present Value (NPV), Internal Rate of Return (IRR), and Pay-Back Period (PBP) .Value Analysis and Value Engineering (VA/VE) were used to justify the selection of technology of painting used. In the investment analysis, assessment factors such as sales of the car, manufacturing cost, time to deliver and level of investment were included. The results show that the challenger was preferable based on team assessor due to its technical superior over the current technology in terms of quality and safety. However, when it tested for feasibility study, the results were not encouraging. Then VA/VE method was used to investigate whether the challenger can fit financially to the requirement set at the beginning by the owner of the project. The final results approved that the challenger was selected.