Charging ahead Featured

5:22pm EDT June 29, 2006
As a 14-year veteran of Interstate Battery System of America Inc., Carlos Sepulveda felt really good about the company and its products when he took over as president and CEO in May 2004.

The battery brand was well-known, at least in part because of a 15-year deal with NASCAR that promotes its products. Customers often wrote letters to the company praising its batteries and bragging about how long they last. And Sepulveda felt good about the company’s staff.

“We had a very successful history of five decades of unparalleled service in the marketplace that we function in,” Sepulveda says. “Interstate batteries have a tremendous reputation, and that emanates from the quality of the product and the quality of the service that surrounds that product to keep it fresh, fully charged and guaranteed power. That was our tremendous foundational strength.”

Interstate Battery began in Dallas in 1952 as a distributor of batteries, and today buys its batteries from other manufacturers and distributes them throughout the country. There are some 200,000 Interstate Battery dealers in the United States, Canada and the Caribbean, and the majority of the company’s products are automotive and commercial equipment batteries.

But to take the company to the next level, Sepulveda saw that a few things needed to change.

For the last two years, Sepulveda has worked on changing the structure of the company, defining a clear vision for how things would be done and taking the company into new territory to promote growth.

Changing for the better
Sepulveda was one of two executive vice presidents before taking the president and CEO position, and the way the company was set up, five vice presidents reported to each executive vice president.

He saw an easier way to keep better tabs on the organization.

“For the sake of promoting agility and nimbleness, and also for the cost benefits, I eliminated that EVP level, so the 10 vice presidents report to me,” Sepulveda says. “I would say that was a pretty big organizational structure change.”

And even though eliminating those two positions complicated his life, it was necessary for the good of the organization.

“I did that out of a commitment to success, not to my personal comfort,” Sepulveda says. “I would say as a result, the ability for the leadership team to interact and have discussions and act proactively or react has been increased, and the time frame for that compressed.”

Sepulveda strives to give the vice presidents autonomy. He holds a once-a-week meeting on Monday afternoons with them as a group. The rest of the week he stays out of their way, acting as a resource or coach whenever needed, even if that means responding to an e-mail late at night.

He also ended some internal debate that he says was taking away from the time and energy employees should have been spending bolstering the company in the marketplace.

The company largely sells car batteries through independent distributorships, and occasionally, it has to take over a troubled distributorship to get it profitable and functioning again. After that, the company typically hangs on to the distributorship, and Sepulveda says some employees have debated whether this is a good idea. About 80 percent of the company’s distributorships are owned by independent distributors; the other 20 percent are owned by the company.

Sepulveda believes owning distributorships is a plus for the company, as it gives it experience at turning around a distributorship which, in turn, can help company leaders model for distributors how to run their operations better. Sepulveda spent some time demonstrating to his employees why he thought this was a good idea and settled the debate, and he’s no longer interested in discussing the issue.

“We wanted to hone our focus on the marketplace,” Sepulveda says. “This sounds like an oxymoron, but we wanted to force collaboration internally so that a minimum of resources get siphoned off in potential friction or potential differing perspectives between areas of the battery company.”

He also changed the warranty program on the company’s car batteries to differentiate the products better in the marketplace. Interstate sells three grades of batteries, and when Sepulveda took over, the free replacement period for a failed battery was 18 months. For its top-rated batteries, the replacement period was increased to 30 months; for the middle-grade battery, the warranty was increased to 24 months, and the bottom-grade battery kept its 18-month warranty.

“It put our free replacement warranty on par with our known quality in the marketplace,” Sepulveda says.

He says the longer warranty will help the company sell more batteries and grow its share of the battery business.

“It’s not without risk, but we believe the benefit far outweighs that,” Sepulveda says.

Battery-powered future
Sepulveda has worked to position Interstate Battery to take advantage of power-hungry devices used today and new technologies that will be used tomorrow.

One way he is building the company outside of its traditional car battery business is through retail stores, called All Battery. Currently, there are 56 All Battery stores in 24 states and Puerto Rico, with 38 of those franchised and the other 18 owned by the company. Within two to three years, Sepulveda wants to have 100 franchised All Battery stores.

He says this is a market ripe for the picking because many new and popular pieces of technology need highly specialized batteries to operate. The stores can either sell a consumer the battery they need, acquire it for them or make it on site.

“The real potential is that the market for what I’m referring to now as the All Battery market is highly segmented, and it’s a spectrum ranging from very basic batteries that are available everywhere to very specialized batteries that are available nowhere,” Sepulveda says. “(For) rare batteries, such as for a cordless drill or other handheld tool, those batteries die. Generally, what people do is contact the manufacturer, and if they can get one, it will be very expensive. What they can do is bring their old battery and that tool to us, and we can fabricate a new battery for them that we guarantee for a year. It’s very economical and doesn’t obsolete what is a worthwhile tool for them.

“As portability becomes more important and our society becomes more mobile, that’s only going to amplify the opportunity. We want to be positioned to provide value to the marketplace.”

Sepulveda also wants to build the e-commerce business. The company cannot sell automotive batteries on the Internet because of post office regulations against shipping hazardous chemicals, and even if it could, the batteries are heavy and the postage costs would rule out that option for most consumers. The Web site instead offers a search engine where consumers can punch in their ZIP code and find the nearest dealer for automotive batteries. All other consumer batteries, such as those sold through the All Battery stores, are available through the Web site.

“We do have substantial growth in our e-commerce site,” Sepulveda says. “We are projecting a little over 100 percent growth in top-line revenue for that site next year. ... We have not done a lot to promote that site, but we see a lot of repeat business.”

Sepulveda is also trying to diversify through the Power Care business segment, which provides critical power and motive power to businesses. As he explains it, the critical power segment provides giant back-up batteries that fuel oil refineries, technology centers, telephone switching stations and other places that need continuous power.

“What the power does is provide you the opportunity to go through an orderly protocol of shutting down so that when power is restored, you don’t have any damage,” Sepulveda says.

The company also sells batteries that are used in forklifts and other warehouse applications, which is the motive power of the Power Care business segment. It is in the beginning stages of both types of Power Care businesses and has high hopes for growing it.

“It’s an incubator and growing,” Sepulveda says. “We are positioned in Florida, in Texas and also the north to see what we can do relative to understanding that business, demonstrating success and then considering the merits of expanding it.”

Sepulveda’s changes are working. Interstate’s revenue has grown from $625 million in 2004 to a projected $750 million in 2006. During that same period, he has reduced the number of employees at the Dallas headquarters from just under 500 to about 460 people.

To accomplish his long-term goals, Sepulveda knows he needs the right team in place. He encourages employees to have an entrepreneurial mindset, to seek opportunities throughout the company that suit their talents and even to suggest colleagues for new positions if their talents match another job.

Sepulveda also speaks about the company and his philosophy on leadership and business at colleges and universities, and as a result, he’s generated some interest among young, talented graduates seeking a job in the business world.

Keeping the Interstate Battery team strong and ready for new opportunities is his among his chief goals.

“People are not Interstate’s greatest asset,” Sepulveda says. “The right people are Interstate’s greatest asset. Develop the athletes and deal with any who are not in the game.”

How to reach: Interstate Battery System of America Inc.,