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experienced significant manufacturing and quality problems when
it converted the machines to vision technology. Compaq U.S. was
unable to provide technical assistance to Xetel because the
machines were not Fuji machines.
In addition to difficulties with subcontractors having
different machines, Compaq U.S. also experienced difficulty with
subcontractors that used different processes, including Texas
Instruments. Although Texas Instruments had acceptable quality,
its use of the batch process of manufacturing created some
difficulties in shipping PCA's on time.
Compaq U.S. purchases from Compaq Asia were nearly identical
to purchases from unrelated subcontractors, but there were some
differences in the transactions between the parties. For
example, Compaq U.S. incurred additional freight and duty costs
annually when dealing with Compaq Asia in the amounts of
$2.6 million and $1.2 million, respectively. With respect to
materials, Compaq Asia was responsible for leftover parts while
Compaq U.S. reimbursed unrelated subcontractors for leftover
parts. In addition, Compaq U.S. paid Compaq Asia in 90.9 days
while unrelated subcontractors were generally paid in 30.3 days.
Another transactional difference was that Compaq U.S. paid for
setup charges in transactions with unrelated subcontractors in
the amount of $2.9 million during 1991 and 1992 while not making
comparable payments to Compaq Asia.
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