Total recharge Featured

8:00pm EDT July 26, 2007

The batteries made by Exide Technologies eventually run out of power, and when Gordon A. Ulsh joined the company as president and CEO in April 2005, the company had also lost its juice.

It emerged from bankruptcy in May 2004 and went through a nine-month, lame-duck period following the previous CEO’s retirement announcement.

Management had no strategy and wasn’t making day-to-day decisions. The company, which produces and recycles lead-acid batteries, struggled to meet financial goals and had fallen short on capital, so it lacked the ability to buy new technologies. Many managers saw the writing on the wall and moved on to greener pastures, and replacements were hard to come by.

Ulsh says the company was idling. “The motor is running, but nothing’s going anywhere,” Ulsh says. He looked deep into the heart of the organization to get a better picture of what he had to work with.

“I saw ... a very strong level of very capable and committed people that really kept the business moving through very difficult times ... that I would describe as generally very loyal but dealing with classic low-level morale because of the public difficulties the company had had,” Ulsh says.

He also looked closely at the market to see if he even stood a chance. The big players, Exide included, were getting bigger through consolidation, creating a huge entry barrier, so new players weren’t a threat. Despite new automotive technologies, all the cars on the road still needed Exide’s products, so there was clearly long-term viability.

These factors gave him hope, so he developed a plan first to stabilize the organization and then to rebuild.

Extinguishing internal fires

Negativity from the outside world constantly hit Exide’s employees, creating the biggest barrier that Ulsh had to overcome.

“You had to listen to your competitor forecast your demise,” he says. “You had to listen to stories of the supplier who sold you product and didn’t get paid, or the supplier who wouldn’t sell you product because he was afraid he wouldn’t get paid. You had to listen to all those things, and people can begin to have an immense amount of self-doubt, and I believe the only thing that erases self-doubt is success.”

To create success, Ulsh first recruited key managers he had worked with in past turnarounds. He needed people who used similar communication and problem-solving methodologies to his to create unity. From there, he solicited employee input in evaluating the company’s issues. He asked what they thought Exide’s product strengths were, what they could do well within the market, and what challenges they were facing. Participation creates buy-in and squashes resistance, but it also helped Ulsh develop a plan.

“We developed the near-term strategy,” Ulsh says. “I’ve never been a big vision sort of person because it seems to imply that there’s an endgame.”

The first part of the strategy was clamping down on everything to get people’s attention.

“Until we knew what we had in the way of process and controls, we put the classic, somewhat onerous controls on everything,” Ulsh says. “If you’ve got a company that’s in trouble and not controlling money very well, you tighten the purse strings on everything.”

Ulsh issued a hiring freeze and became the sole person who had the authority to approve travel and capital expenditures. He also put controls on price quotes to ensure salespeople didn’t offer products and services at lower-than-necessary prices.

“Our theory was put a bunch of tight controls in place — the equivalent of shooting up a flare — so at least you got everyone’s attention and made them look up,” Ulsh says. “Then you could begin to work on the real issue. It was about trying to make sure they understood there was a different way of making decisions about the business, and you must comply.”

While the tight controls seemed drastic, Ulsh made sure his people knew the reasons behind the decisions.

“Part of what I believe in terms of communicating is the whole issue of transparency,” he says. “Tell them what you believe in, why you’re making the decision, and ask them to cooperate.”

Certainly, some didn’t cooperate, so he worked with, debated with and tried counseling them, but in the end, he changed the players if they didn’t comply.

From there, Ulsh looked at processes already in place. He relinquished some control if he thought a process could run well as long as it had a capable manager. As he made these changes, communication remained critical.

“Employees need to be told repeatedly because they have their future, their livelihood, invested in you,” Ulsh says.

He used town-hall meetings, teleconferences and newsletters to repeat his message and update employees on stability-creating initiatives. Even if people don’t buy in immediately, they will develop trust to at least tell you why, and you can use that trust to get participation.

“You start getting people to raise their hand and say, ‘I’ll work on that. I’ll do this. I’ll lead that challenge,’” Ulsh says. “As they get some wins, that’s what helps people to buy in.”

As leaders create positive momentum, they need to recognize employees, too.

“While you challenge people, when you have people that inevitably win or succeed or pass what you’re doing, you have to take some time to praise them,” Ulsh says. “People call it ‘celebrate success.’ You really have to thank people and praise them, and after just a little bit of celebration, you raise the bar so that we keep trying to get better the next time.”

Positive experiences and success will also change people’s attitudes.

“People see change like this and think, ‘Gee, it’s really drastic and aggressive,’” Ulsh says. “Then they begin to see the right decision-making methodology not only from myself but from other people in the organization, and they say, ‘You know, this is more like how a real company operates.’”

External relations

While the flames of bankruptcy and its aftermath left employees with first-degree burns, many of Exide’s customers and suppliers had suffered second- and third-degree burns, losing hundreds of thousands, or even millions of dollars.

“They have every reason to doubt you,” Ulsh says. “It’s awfully hard to just say to someone, ‘It’s going to be all right because I told you so.’ These people have been damaged by this Chapter 11. You need to tell them why you believe that the issues are the issues and what steps you’re going to take, and then tell them how you’re doing along the road.”

Ulsh talked to customers and suppliers, and he often got the same question.

“This company is sort of in shambles,” they started. “What did you see, Gordon, that led you to go take on this challenge and move yourself from Texas to Georgia and jump into the pool?”

He explained the things he saw in the market and within the organization that made him undertake the challenge, and sometimes, he poured his heart out.

“Look, I’ve been in these messes before,” he said to them. “Here’s the things that we’ve done, and here are the weaknesses we’ve seen, and here’s how guys like myself and other people that I’ve worked with have fixed this in the past, and it works — at least give us some time.”

While some chose to give him a chance, often the wounds were too deep, and he didn’t win every battle. Despite the losses, he focused on communicating progress to the ones left standing with him and making sure he was completely transparent in his dealings with them to win back their trust. He also got consensus that he was working on the initiatives that mattered most to them, and then he repeated that process with them.

“It was a matter of being certain we believed we had the right story, getting people in place that believed in the story and telling it over and over and over,” Ulsh says. “It’s repetition so people get used to hearing it, and it’s repetition to the point where they can judge how we behave with what we said that was important. Employees are, in many ways, the best critics. Employees, suppliers and customers — they’ll tell you whether or not they believe you’re behaving in line with what you said your priorities are.”

As suppliers and customers began to see improvements and decided to stick with the business, it created a newfound confidence for employees, too.

“As we began to demonstrate that we could make the right decisions, and we began to have some more wins in the marketplace, we began to solve some contractual relationships, and we had begun to get some more and even better business,” Ulsh says. “People began to get what I think is the miracle pill: They began to get confidence in the fact that our business could survive, that we could do well, that our customer could need and want us.”

Rebuilding margins

With the flames extinguished and signs of life blooming, Ulsh has been able to focus on rebuilding, but to do that, he needed to improve Exide’s margin. So last year, he told employees they wouldn’t be getting raises.

To offset that, management created an incentive program. It set aside an amount equal to the average everyone would have received in raises. If employees met goals for the year, they would get that back, and if they exceeded those targets, they would get more.

“We had to stand in front of people and say, ‘Gee, we have this whiz-bang incentive program,’” Ulsh says. “‘You won’t know if it’s good for you for another year. And on top of that, we’re not going to give you a raise because we don’t have the cash, but trust us, this will be good for you.’

“That means we’ve got to be transparent. People have to see the way we behave, and we have to stand in front of people and take their questions, take the challenges, take the people that just don’t think it’s fair, listen to that and stand firm in our ground.”

After the first year, nearly everyone did better than they would have with just earning a raise, and the program will stay in place. On top of that, Exide will reinstate modest pay raises this year to become more competitive in the market.

Ulsh was also able to raise more capital in September from existing shareholders, which he then invested in long-overdue, new technology. Exide also renewed many of its advertising initiatives, including its work with NASCAR. This gives employees something positive to talk about with people who have only seen the negatives.

“People are beginning to say they are part of a company that can survive and grow and be respected, and that puts that thing I call confidence back into the business,” Ulsh says.

Wall Street has also gained some confidence, as Exide’s market cap went from about $72 million at the end of March 2006 to about $500 million a year later.

Since emerging from bankruptcy in May 2004, revenue has grown more than 13 percent, to $2.82 billion in fiscal 2006. From May 2004 through March 2005, the company posted a net loss of $467 million; a year later, Ulsh had slashed that to $173 million.

With Exide building a stronger foundation every day, the company is almost to the point where Ulsh can focus solely on the next phase: growth.

“Our message all along is market share is not our first priority,” he says. “Creating a viable business for our folks to have a long-term place to be is important. Creating stability with our suppliers is important. Creating stability for our shareholders is important. And when we can do that, we’ll worry about growing.”

HOW TO REACH: Exide Technologies, (678) 566-9000 or www.exide.com