Restructuring a $400M automotive joint-venture investment case
A proposed manufacturing joint venture cleared its strategic rationale and failed its returns test. Headquarters would not approve it, and the local partner would not restructure without a reason.
The plant was sized for a narrow model range, so fixed costs were absorbed by too little volume. Currency exposure on imported components compounded the problem, and the original case treated both as fixed inputs rather than decisions.
We rebuilt the model to make production mix and FX explicit variables, then ran scenarios across both. The analysis showed the constraint was absorption, not demand — adding three models to the mix moved the plant past its fixed-cost threshold without new capital lines.
- —Rebuilt investment model with mix and FX as variables
- —Scenario analysis on production mix, volume and currency
- —Fixed-cost absorption and break-even analysis
- —Revised capital sequencing and localisation plan
- —Approval-ready case for headquarters investment committee
Projected ROIC moved from 9% to 13%, taking the case above the internal hurdle rate and securing headquarters approval — with a mix decision, not additional investment, doing the work.
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