Both of these are ultimately management failings.

I agree. If there are quality problems, they should fire the management and launch a quality/global productivity improvement program and retrain the workers (and the managers!).

If there is a local market, there is no reason to close the factory, unless its location poses a major logistical problem.

If the technology/design is flawed, they better change it, but then, I doubt it would be limited to this factory.

Indeed, the way they handle the conflict tells a lot about their vision/practice of management...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet