Operational matters – ION Transmissions Sample Clauses

Operational matters – ION Transmissions. ION Transmissions manufactures 4 speed transmissions and manual transmissions. Its major customers are Ford (with which it had a 35 year relationship) and SsangYong. In anticipation of changing market demand, ION Transmissions was preparing to expand its production capability to differentials, transfer cases and five/six speed transmissions. Historically, forecasts would be prepared by plant personnel. This was the case with the 2005 forecasts prepared for the April Statement, but the 2006 forecasts were prepared by ION Transmissions head office personnel. The plant personnel had no involvement in the May IM, July IM or August update. No changes were made to the forecasts for ION Transmissions in these documents over this period. From the plant’s perspective, downward revisions were made to forecasts for ION Transmissions during this period but it was only version 6, finalised in September 2004, which was incorporated in the ION Consolidated Group Head Office forecasts and provided to the MOFA Lenders on 22 October 2004. In December 2004, following the appointment of the Administrators, management further downgraded the 2005 forecasts. The changes in forecasts over the period are summarised as follows: Forecasts 2005 Rev EBIT $m $m 2006 Rev EBIT $m $m 2007 Rev EBIT $m $m 2008 Rev EBIT $m $m May IM, July IM, August Update 295.4 51.3 361.3 63.1 454.1 63.4 494.1 66.9 September forecast 257.6 40.6 - - - - - - December forecast 230.9 17.2 203.3 22.0 315.2 34.6 340.5 37.8 The drivers for downgrades of the forecasts were: ▪ significant changes in assumed customer products and volumes; and ▪ reduction in ACIS revenue as a result of deferral of capital expenditure projects. The major customers' demand issues are as follows. SsangYong ▪ Softening of SsangYong’s 4 speed transmission demand was known within the business from May 2004 onwards. The April Statement and the May IM assumed 52,000 units in 2005 based on SsangYong’s original estimate of 55,000 units per annum. ▪ On 7 May 2004, SsangYong revised its estimate down to 42,840 units per annum and on 29 July 2004 down to 36,120 units per annum. ▪ The managing director’s report to the board of ION Limited dated 22 September 2004 acknowledged that an off take rate for SsangYong in the vicinity of 25,000 units for the year ahead would have implications for future activities and xxxxxxx levels at Albury. ▪ The forecast $18 million revenue effect in 2005 due to lower SsangYong 4 speed transmission sales compared to the...