Published on March 12, 2014
HVAC MANUFACTURER TURNAROUND SUCCESSFUL RESTRUCTURING AND RETURN TO PROFITABILITY
REALITY Held by distressed assets fund Top heavy management team operating in silos 48 Months of Recurring Losses Losing $15,000,000 a year Weekly payroll high; Second shift not needed Need for Restructuring CEO not aware of costs No mechanism for commodity price adjustments Excess inventory
GAME PLAN Address core competencies Cut operating expenses Reassure employees, vendors, key clientele Manage commodity costs (metals, solder, e.g.) Reduce manufacturing workforce Draw down inventory Institute plant energy savings plan Modify work rules and break schedule to increase productivity Pass price increase on to trade (customers)
OWNERSHIP GROUP DYNAMICS Distressed fund Off the radar screen Poor financial controls Burning cash Span of control too high – too many levels of management and production Useless reports nobody reads Dashboard overload – needed to prioritize management analytics CEO a politician not a manager
OPERATIONAL CHALLENGES Workforce reduction of 28% Addressing senior team “Sacred cows” Improving commodity price sensitivities Improving quality Investing in R&D to gain market share from category leader
FINANCIAL IMPACT MAJOR CHANGES Reduction of $17,500,000 of overhead New work rules Product P&L moved from loss to positive margin Solidified trade relationships Increased price to recover profit More selective strategies and closer oversight of export markets
FINANCIAL IMPACT BEFORE: Losing $15,000,000 a year AFTER: Profit of $2,500,000 a year FINANCIAL STABILITY Company avoided bankruptcy Company secured investment enabling Satisfied subordination issues Company consistently profitable
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