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UV1192 Rev. Mar 9, 2011 VICTORIA CHEMICALS PLC (A): THE MERSEYSIDE PROJECT Late one afternoon in January 2008, Frank Greystock told Lucy Morris, “No one seems satisfied with the analysis so far, but the suggested changes could kill the project. If solid projects like this can’t swim past the corporate piranhas, the company will never modernize.” Morris was plant manager of Victoria Chemicals’ Merseyside Works in Liverpool, England. Her controller, Frank Greystock, was discussing a capital project that Morris wanted to propose to senior management. The project consisted of a (British pounds) GBP12 million expenditure to renovate and rationalize the polypropylene production line at the Merseyside plant in order to make up for …show more content…

The company positioned itself as a supplier to customers in Europe and the Middle East. The strategic-analysis staff estimated that, in addition to numerous small producers, seven major competitors manufactured polypropylene in Victoria Chemicals’ market region. Their plants operated at various cost levels. Exhibit 1 presents a comparison of plant sizes and indexed costs. The Proposed Capital Program Morris had assumed responsibility for the Merseyside Works only 12 months previously, following a rapid rise from the entry position of shift engineer nine years before. When she assumed responsibility, she undertook a detailed review of the operations and discovered significant opportunities for improvement in polypropylene production. Some of those opportunities stemmed from the deferral of maintenance over the preceding five years. In an effort to enhance the operating results of Merseyside Works, the previous manager had limited capital expenditures to only the most essential. Now what previously had been routine and deferrable was becoming essential. Other opportunities stemmed from correcting the antiquated plant design in ways that would save energy and improve the process flow: (1) relocating and modernizing tank-car unloading areas, which would enable the process flow to be streamlined; (2) refurbishing the polymerization tank to

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