In January 2002, Theodore Zampetis took over as president and CEO of a struggling Shiloh Industries Inc. The leading manufacturer of advanced metal product solutions for high-volume applications in the North American automotive, heavy truck, trailer and consumer markets was $290 million in debt and the banks would not finance the company any further.
Zampetis had only a few weeks to either file a 10K with the SEC or file for Chapter 11 bankruptcy. Rather than roll over and give in, he began to execute a strategy, and he had to do it quickly.
“I got together with my president and my plant head and said, ‘Here’s what I am going to do. Here’s how I’m going to reduce cost and start creating cash flow tomorrow,’” Zampetis says.
Most people had all but kissed Shiloh Industries goodbye but not Zampetis. He knew he could turn the company around.
“We held a teleconference with the banks and all 12 entities were in on the call, and we explained the plan,” Zampetis says. “‘Here’s what is happening, here’s why it’s happening, and here’s what I’m going to do in the next 15 days, 30 days, three months, six months,’ and on and on.”
With time being of the essence, everybody started signing on quickly. Zampetis went around to each customer and plant to tell customers and employees what has happened, why it has happened and what the company’s plan was.
“I told them, ‘You will look back in six months and be proud of what you accomplished,’” Zampetis says.
Here is how Zampetis nursed Shiloh Industries from the edge of bankruptcy and brought it back to life.
Stop the bleeding
Once Zampetis made everyone aware of the dire situation the company was in, he began to focus on stabilizing the business.
“It was execution in three areas: No. 1, I’ve got to stabilize the company because the company was sick, demoralized and it was dying,” Zampetis says. “Once we stabilized the company, the next thing was figuring out what was the root cause of the problem.”
Zampetis had to understand where the company made money, where it lost money and why it was making or losing money.
“Once we started characterizing the process at each plant internally and focusing internally, it became clear to me what the priorities were in the bigger picture of the company and what I had to do,” he says. “Yes, there were a thousand problems, but I didn’t care about the thousand problems. I only cared about the top 10 problems and how I could attack them quickly one by one.”
At the same time, there were external pressures. For instance, one of Shiloh’s main customers had good news for the company. It still had a multimillion-dollar program with Shiloh that it wanted to continue with the organization. The only problem was that Shiloh had no cash to fund the program.
“I said … ‘We are going to the customer and let me talk,’” Zampetis says. “The next day, we were at the customer talking to the highest level in purchasing, and I told him that, in my 31 years in the business, I never thought I would go to the customer and politely, but with tears in my eyes, tell him that he’d better take the contract he awarded to us and give it to someone else, because we simply have no cash.
“‘Under your terms and conditions, we cannot do it. However, if you help us, we can probably do it and do it better than anybody else in the world.’”
With the banks unwilling to budge because the company was $290 million in debt, Zampetis and the executive director of purchasing at the customer company negotiated back and forth until they agreed to help Shiloh Industries fund the program for them.
“I knew one thing; even though this would be a battle going forward, there was only one way to go, and that was up,” he says. “From that point on, Shiloh Industries started climbing and generating cash flow and applying that cash flow back into the company to protect our critical skills and technologies.”
Shiloh’s critical technologies were devastated. The company needed to understand how to bring them up to be best in class and, at the same time, not to let any program down or make any customer dissatisfied.
“We started generating cash flow and applying it intelligently and above all, started deleveraging the company,” he says.
Once the company began to slowly recover, Zampetis had to make sure to communicate throughout the organization so people stayed focused and kept moving forward strategically.
“If we are going to reinforce a culture of transformation, we have to communicate and we have to communicate not only our problems but give our employees, from top to bottom, an idea of what is the source of the problem,” he says. “You have to have a disciplined mind to characterize the process quickly and identify and measure the impact and analyze.”
Moving forward, Zampetis made sure that any decision he made was strategic.
“When the company is in deep trouble, you’ve got to make decisions strategically about all the wonderful ideas that got you into the problem to begin with,” he says. “The old management team did not learn their lesson.”
Shiloh had three objectives: No. 1, to stabilize the company and start generating cash flow, No. 2, to apply that cash flow to deleverage the company and rebuild the company internally, and No. 3, to develop its people to be disciplined so such past situations never happen again.
But just as the company was regaining its footing, the recession of 2009 hit. Chrysler and GM, which make up 60 percent of Shiloh’s business, filed for bankruptcy.
“Everybody thought we were done,” Zampetis says.
As signs that the economy might be in trouble began to spread, Zampetis and Shiloh Industries were taking precautionary measures.
“If you look at our records and look at what happened in November 2008, I took my salary down to almost nothing because I knew there was going to be a disaster,” Zampetis says.
Shiloh’s sales went down 53 percent, its variable manufacturing cost went down 49 percent and its fixed cost, including Zampetis’ salary, went down 39 percent. However, the company made sure to protect its critical skills during the recession.
“I showed our leadership that in a moment of crisis I wasn’t thinking about lining my pocket,” he says. “I told them, ‘We are suffering and sacrificing right now, but at the end of the day, you will look back and be so proud.’”
During 2009 when all of this was happening, Shiloh Industries ended up generating $18 million extra free cash flow and reduced debt.
“In 2010, we were expecting the industry to start picking up because some of our competitors went bankrupt in 2009, and we picked up a lot of their business,” he says. “Our sales revenue from 2009 to 2010 went up 69.7 percent.”
The company’s productivity nearly doubled, its technology became extremely efficient, quality was exceptional and the employees were pumped up about the company’s progress.
“The year 2011 was a wonderful one, and 2012 was a very good year,” Zampetis says. “We now are a clean-balance-sheet company. We have advanced technologies that are the best in the world.”
Today, Shiloh Industries is a $600 million company with 1,400 employees. With the company back to pre-crisis levels, Zampetis decided to retire as president and CEO in December 2012. However, he left the incoming leadership with a very stable company.
“It will be a two-point approach,” he says. “One is to maintain all the good disciplines and don’t water them down because that would be a big mistake. But then the company’s mission looking forward is growth.” ?
How to reach: Shiloh Industries Inc., (330) 558-2600 or www.shiloh.com