Geared up Featured

8:00pm EDT September 19, 2006
  When it comes to communication, Metaldyne chairman, president and CEO Tim Leuliette has one thing to say: “Thank God for the BlackBerry.”

The wireless e-mail device allows him and the company’s senior management team to bounce ideas off each other no matter where they are. That communication spawns ideas, which in turn become projects that help the company evolve in the changing automotive marketplace.

Leuliette’s insistence on the constant motion of ideas has produced eye-catching results for Metaldyne. The Auburn Hills-based producer of engine and chassis components netted worldwide sales of almost $2 billion last year, due in large part to accounts with many of the world’s largest automakers.

It would be easy for a company with the track record of Metaldyne to rest on its laurels and continue to produce the same parts for the same companies. But Leuliette says in the auto industry, which can be tumultuous, that is a recipe for disaster.

He demands his company stay adaptable and remain on the lookout for the next big wave. It’s the only way Metaldyne will be able to continue flourishing in the coming years and decades.

For Leuliette, it all starts with a vision and figuring out how to make that vision a reality, even if it means some initial hand-wringing among Metaldyne’s 6,500 worldwide employees.

Taking charge
Five years ago, Metaldyne committed to opening up engineering centers in Japan, Korea and China. It was a move aimed at making headway in the growing Asian market, but employees at a Metaldyne facility in Indiana became concerned that the new commitment to Asia meant that jobs and money would be leaving the United States.

Leuliette said those workers needed to be refocused on the company’s vision.

“The people in Indiana said, ‘I hear word that it sounds like money is leaving Indiana and going to Asia,’” he says. “And we said, ‘No, if we are a better supplier to Toyota, to Hyundai and Honda and Nissan, we will get business from them around the world, including in the United States.’”

Leuliette says the employees were skeptical at first, but the plan quickly swung into action. Now, the Indiana plant is the only plant that produces connecting rods for Hyundai in North America.

“Now, they’re believers down in Indiana,” he says.

The decision to move Metaldyne into Asian markets was rooted in the knowledge that the industry was shifting in that direction, and Leuliette didn’t want his company to be left behind. But beyond that, it was rooted in one of Leuliette’s principal beliefs as a business leader.

“CEOs don’t get measured in quarterly results in the first year or two of their tenure,” he says. “It’s in the third, fourth, fifth year of their tenure, are they playing out their game plan, the outline.”

CEOs are in place to give a company a long-term vision and to modify that vision in a manner that best suits the company.

“It’s not that the strategy has to be so rigid that events of the world don’t modify it,” Leuliette says. “But your strategy should be such that it’s not so dependent on $2-a-gallon gasoline or on General Motors recovering to 50 percent market share. It has to be realistic.”

An effective business strategy is born through taking constant stock of a company’s variables and bringing the senior management in on the decision-making process, he says. If you don’t involve your management team in the process, it can short-circuit the entire plan.

“A decision is not something where you walk into a room and say, ‘This is the decision, and it’s A, B or C.’” Leuliette says. “It’s rather that we talk about these issues, where we’re coming from, and you bring them along. I think a leader needs to sell his ideas. He needs to sell the fact that he’s got confidence in a plan and strategy, and bring those people along with him.”

To help bring people along at Metaldyne, Leuliette lets his managers find their own solutions to a problem or issue, even if he has a good idea of what the answer will ultimately be.

“I’ve been known to take two or three of my strongest managers, say, ‘Look, there’s three paths here, three choices. Each one of you take one, come in next week, and take us through the pros and cons,’” he says. “That way, you begin the dialogue. You talk about it a lot.”

One of the keys, he says, is to open as many eyes as possible to an idea before the proverbial bullet is fired and the decision is made, because even with volumes of input, the ultimate decision always falls to the company head. And the leader must be prepared to act in any situation.

Leuliette has faced his share of tough decisions at Metaldyne, but if the research has been done, the answer is usually clear.

“The right answer is almost always the obvious one,” he says. “The challenge is understanding and coming to grips with the ramifications of making that decision. It could be a business decision, layoffs, risking the company. The challenge is getting the team and the organization prepared for the ramifications. But that’s leadership.”

Outside the comfort zone
Metaldyne is a privately held company, but it has public debt, so bond analysts track it.

When they make presentations at bond analyst meetings, Metaldyne’s leaders always ask the same question: “Do you know who our competitors are?”

Analysts can rattle off its competitors in European markets, but the same question asked about Asian markets draws blank stares.

“That’s because we, as a culture and in business, have grown up with a North American/Eurocentric model,” Leuliette says. “We’re more comfortable going across the Atlantic than the Pacific.”

For Metaldyne to continue growing, that status quo had to be shattered. The company forced itself to go to Asia, sending team members to Japan, China and South Korea for offsite meetings. Leuliette says venturing across borders and dealing with new companies in emerging parts of the world is the only way a business can truly grow to global standing. And that requires bold leadership willing not just to stamp out transactional relationships in new markets but to explain in detail what they can offer to the market.

Metaldyne carved out an initial engineering and sales presence in Asia five years ago, but to Leuliette, that wasn’t nearly enough. Potential customers needed face-to-face interaction so they could see what Metaldyne is all about.

A major emerging client for Metaldyne is Hyundai, based in South Korea. Hyundai leaders knew that Metaldyne could offer them parts for their cars, but Leuliette wanted them to know what it also offered in terms of a vision and business partnership. So some of the company’s leaders set out on a road show, halfway around the world.

“How do we get Hyundai to know us better?” he says. “We’re going to build an engineering and sales center there. But we want them to know us. It’s easy to stop in on our way to work in Michigan and talk, but how do we do that in Korea?

“And we said, ‘Let’s package all of our technologies in Korean, put some of our Korean employees in place and train them, and we’ll go over there with them. We’ll give a presentation to Hyundai of all of our capabilities, with display stands and cutaway vehicles. We’re going to show them who we are.’”

Leuliette would have been happy if 100 or 200 engineers had shown up. Instead, 1,400 engineering and salespeople from Hyundai showed up, and the presentation went a long way toward solidifying Metaldyne’s reputation with the automaker.

“Hyundai will be one of our largest customers by the end of the decade,” Leuliette says.

Leuliette says that staying in a predetermined comfort zone is a sure recipe for business failure. Denying that evolution is necessary is a major symptom of a company unwilling to take the first, uncomfortable step toward a new market.

“Denial is a disease of change, and arrogant denial is a fatal disease,” he says. “We’re here knowing that whatever strategy we’re working on has to evolve and change as the world changes.”

It’s a reason why, when seeking out a new manager to help direct the company, Leuliette wants an open-minded person who is adaptable.

“We want people who have a grasp of who they are and what values they bring to the table,” he says. “People who are not uncomfortable about being stretched. This is not a place where you come for the status quo. This is a place where you come to be a part of changing the industrial fabric of this industry and this country.”

Scar tissue
Leuliette says not every business idea will succeed as well as Metaldyne’s venture into Korea. Business leaders must anticipate some degree of failure, and to an extent, must embrace it when it occurs.

“Not many CEOs are 20 or 30,” he says. “Most are 40 or 50, and with good reason. They come to their job with 25 to 30 years of scar tissue built up in business. That scar tissue can either prevent you from taking risks, or it can be the basis of the data sample you use to take risks.”

A CEO with decades of business experience has learned his or her share of lessons. They either find out the status quo is a dead end, or have so thoroughly internalized the company practices over the years, that they can’t think of any other way to act.

“I think a lot of companies take the risk-taker and keep pounding them down and sanding them over so that by the time he gets up to the CEO’s job, he sits back and says, ‘I’m a product of this company, and all I know is what we’ve done before,’” he says.

At Metaldyne, Leuliette tries to take the psychological scar tissue that builds up from run-ins with failure and turn it into something positive for the company.

“You fall off the horse, then get back on the horse,” he says. “You take risks knowing some of them won’t pan out, but that’s not a reason to say, ‘We won’t take any more risks.’”

Leuliette says that risk is inherent in business, and rather than fear it, CEOs should learn to accept it and use it to their advantage. The worst thing a company can do is crush the entrepreneurial spirit of a risk-taker, so long as the person’s risks are grounded in research and facts.

“You can’t penalize someone for taking risks,” he says. “Now, if someone makes the same mistake two or three times, it might be time for a talk. But it’s a culture, and as a CEO, you have to instill that culture.

“You can’t scold people for taking risks and failing from time to time. Otherwise, you will start to create that environment where the willingness to take risks goes away.”

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