Automotive News - March 9, 2009 - (Page 13) FEBRUARY 9, 2009 • 13 10 things I learned in Chapter 11 Larry A. Denton I was CEO of Dura Automotive Systems when the company filed for Chapter 11 protection on Oct. 30, 2006. It emerged successfully at the end of June 2008. Even though the federal government has extended loans to General Motors and Chrysler LLC, other suppliers and automakers may face the prospect of bankruptcy as the industry continues to contract. Here are 10 insights I learned as Dura worked to emerge from Chapter 11. 1. Start restructuring before filing. Actions you take before bankruptcy will pale in comparison to actions you will be forced to take in Chapter 11. 2. Develop a single timing chart for consultants, lawyers and managers. Pick an exit date, and measure weekly progress. You will be overtaken by a group of professional bankruptcy experts: lawyers, capital consultants, financial consultants, maybe even a chief restructuring officer. In many cases, the fees exceed $600 an hour. Every day you spend in bankruptcy diminishes shareholder value and decreases your chances of exiting. Lock all the experts and your management team in a large conference room and force them to develop a single timing chart that identifies action items and critical milestones. Project a firm exit date. Identify detailed work plans. The timing chart is a tool to stay on track, measure progress and communicate with every stakeholder. 3. Own the process. Remember, those helpers all have their own agenda, and most of the EDITORIAL STAFF 313-446-0361 E-mail autonews@crain.com Web site autonews.com Keith E. Crain Publisher and Editor-in-Chief Peter Brown Associate Publisher and Editorial Director DETROIT 313-446-0361 Fax: 313-446-0383 1155 Gratiot Ave. Detroit, MI 48207-2997 David Sedgwick Editor dsedgwick@crain.com Edward Lapham Executive Editor elapham@crain.com Richard Johnson Managing Editor rjohnson@crain.com John K. Teahen Jr. Senior Editor Mary Beth Vander Schaaf Deputy Managing Editor Charles Child International Editor David Kushma Retail Editor Dave Guilford News Editor James B. Treece Industry Editor Jesse Snyder Senior Writer comment — employees, suppliers, and your customers — understands that the situation is desperate when you file Chapter 11. Take advantage of that. The key is consistent communication and transparency. Be decisive and aggressive and move quickly. 7. Increase customer transparency. Normal customer meetings are most often directly or subliminally centered on price and price reduction. That changes after filing Chapter 11. Quality and delivery become No. 1; new business becomes No. 2, and customer accommodations become No. 3. You must develop trust and confidence among your customers. Monthly, we met with every key customer in every region of the world to encourage confidence in us and establish good will. Using this strategy, Dura gained new business while in bankruptcy. 8. Remain as enthusiastic and optimistic as possible. On only three nights (out of 605 bankrupt days) did I go home thinking we were going to fail. But I never conveyed my worries to the team. Leadership sets the tone for the organization. Enthusiasm multiplies your strength. 9. Don’t lose sight of a five-year vision. To exit with a long-term, sustainable position, you must maintain your vision, including sales goals. Dura established new cash flow and liquidity processes. Global expansion was driven through joint ventures. During 20 months of bankruptcy protection, we opened a joint venture and built an engineering center in India, began a joint venture in Chi- na, and built and launched three new plants in Mexico. In some ways, bankruptcy gave Dura the agility to grow faster globally than nonbankrupt competitors. 10. For long-term success, meet and exceed quality and delivery goals. Customers want to buy the highest quality parts at the most competitive cost. They will be forced to buy elsewhere if you give them a reason, and there is no better excuse than poor quality and delivery. Dura had no customer interruptions while in bankruptcy. Chapter 11 can be a powerful tool, but it’s no silver bullet. It destroys corporate value and should be avoided if possible. This industry has been given a great chance, and I hope this insight encourages decision makers to identify key issues and make tough decisions that enable long-term sustainability avoiding the use of this tool. Larry A. Denton is the former CEO of Dura Automotive Systems Inc. time it is not your vision. They won’t be around when the company emerges so you have to take charge. Use the timing chart to track progress and hold a weekly update meeting. Never let anyone off the hook. People will be watching how you handle someone who misses an assignment. 4. Identify key employees and develop a retention plan. A good rule of thumb is 25 senior executives for every $1 billion in sales. When you file Chapter 11, every competitor will come after your best talent. 5. Expect things to go wrong. Bankruptcy ends with one of two results: You emerge, or you liquidate. Your job is to avoid liquidation. Remember, not everyone wants that result. It is important to have confidence in your plan and anticipate that new stumbling blocks will appear daily. 6. Leverage the process to accelerate cost reduction. Most things associated with Chapter 11 are extremely inefficient and costly. But there is always a rose among the thorns, and in this case it’s the speed of cost reduction. Everyone What do you think? We would like to hear from you. Send a letter to the editor via e-mail (autonews@crain.com) or to the Detroit address near the top of the box at right. Here’s what we need. No more than 250 words Your name and title, company name if we can print it, city and state; or tell us about your connection to the auto industry Your phone number or e-mail address Your permission to print it Karen Faust O’Rourke Insight Editor COPY EDITORS: Bob Allen, Tom Fetters, Patricia C. Foley, Kenn Jones, Gregory Skwira Susan Zavela Bamford/Graphics Editor Rick Kranz/Product Editor REPORTERS: Leslie J. Allen, David Barkholz, Ralph Kisiel, Jamie LaReau, Arlena Sawyers, Robert Sherefkin, Richard Truett, Bradford Wernle, Amy Wilson Mary Raetz Director, Automotive News Data Center Debi Domby, Camille Pippen Research Assistants Dan Jones Office Manager Robertta Reiff Editorial Assistant Corinne M. Price Information Center Test Track: Will GM’s wild ride have to end? One of the top attractions at Disney World’s Epcot Theme Park in Florida is Test Track, a 60-mph thrill ride sponsored by General Motors. Since it opened 10 years ago, one insider says, more than 70 million people have taken a ride on Test Track then visited GM’s display. But GM may be forced to walk away from this captive audience when its contract expires in March. Blame GM’s severe economic plight or congressional scrutiny or both. Everything is on the table, even abandoning a valuable sponsorship. For Disney World fans, Test Track is a destination. In good times, the ride attracts some 20,000 people a day. After the ride, they hear countless messages about GM vehicles. Usually 12 to 15 vehicles are displayed — both current GM nameplates and concept cars from the past. comment © GM CORP. Rick Kranz LOS ANGELES Kathy Jackson/Bureau Chief 323-370-2481 Fax: 323-655-8157 Alysha Webb/Reporter awebb@crain.com 6500 Wilshire Blvd. Los Angeles, CA 90048-4947 NEW YORK Diana T. Kurylko/Reporter Phone/fax: 908-273-6059, dkurylko@crain.com WASHINGTON Donna Harris/Reporter 540-668-7295 Fax: 540-668-7296 Harry Stoffer/Reporter 202-662-7212 Fax: 202-638-3155 814 National Press Building Washington, DC 20045-1801 MID-SOUTH Lindsay Chappell/Bureau Chief 615-371-6654 Fax: 615-371-6655 April Wortham/Reporter/615-371-6617 104 East Park Drive, Suite 315, Brentwood, TN 37027 SHANGHAI Steven Ribet/Staff Reporter (86) 21 6431 1227 sribet@crain.com TOKYO Hans Greimel/Asia Editor +81-3-3828-9060 Fax: +81-3-3828-9061 hgreimel@crain.com Yurakucho Denki Bldg., 20th Floor 1-7-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan TURIN Luca Ciferri/Reporter/lciferri@craincom.de +39-011 961 0194 Fax: +39-011 961 0113 Viale Cavaglia, 8 10029 Villastellone (TO) Italy autonews.com DETROIT Dave Versical/Editor Automotive News Online dversical@crain.com 313-446-6789 Philip Nussel Managing Editor, Automotive News Online Victor Galvan/Web Editor vgalvan@crain.com 313-446-0345 Scott Kennedy/Multimedia Editor Rick Kranz is product editor of Automotive News. on investment,” she said. GM’s history with Disney at Epcot dates back to 1982 when they teamed up to create the World of Motion pavilion. That attraction was replaced with Test Track in March 1999, a ride Disney and GM developed together. Test Track is a natural for GM — or any automaker. It evokes an automotive test track but essentially is a roller coaster, where the cars travel down a nearly 1-mile long track at around 60 mph. Each car holds six people, and the cars ascend a steep, three-story high terrain, then coast downhill across bumpy roads and around banked curves. The hairpin turns test the cars’ suspension and the riders’ nerves. The cars zoom into chambers where riders endure extreme heat and cold, at temperatures that are 100 degrees apart, Disney says. A car passes through the heat chamber during Test Track, a ride sponsored by General Motors at Disney’s Epcot Theme Park near Orlando, Fla. It’s a ride parents and kids talk about for some time. Disney owns the attraction and property and staffs the ride. GM provides the sponsorship, estimated at about $5 million a year, according to someone familiar with Test Track. the automaker is borrowing billions of dollars from the federal government to stay afloat. Should GM walk away from Test Track, another automaker, possibly an import, may snatch the opportunity and sign with Disney for years, maybe decades. For an automaker, Test Track is the perfect venue to build a positive image and woo car buyers. But for GM, those days ma http://www.autonews.com http://www.autonews.com
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