Lessons Learned Before, During and After Recovery in Michigan
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MACKINAC ISLAND, MI--June 2, 2011: Today at the Mackinac Policy Conference, Charles "Chip" McClure, chairman, CEO and president, Meritor, Inc.; Richard E. "Dick" Dauch, co-founder, chairman and CEO, American Axle & Manufacturing (AAM); and Michael E. Duggan, president and CEO, Detroit Medical Center (DMC) led a discussion titled "Improving Michigan's Economic Environment: Lessons from Business Leaders." The panel was moderated by Stephen Clark, anchor, WXYZ-TV, ABC.
Following up on keynote remarks from Jim Collins, author of Good to Great and How the Mighty Fall and Why Some Companies Never Give In, the panel focused on Collins' analysis of "Stage 4" companies, those "grasping for salvation."
McClure, Dauch and Duggan spoke about how their three diverse companies prepared for risk, opportunity and change, and survived "Stage 4" as they implemented turnaround strategies of reducing costs and altering their core competencies to successfully emerge from a down economy.
In 2009 at the height of the recession, the commercial vehicle market dropped by 50 percent in North America and 74 percent in Europe, requiring fast adaptive actions by suppliers.
"The key to surviving a major downturn is preparation," said McClure. "We operate in a cyclical industry and have to not only be prepared for downturns, but be aware of signs that things could be aggravated by economic crisis. We actually began our cost and debt reduction strategy in 2006 before the worst of the crisis hit."
Through an intense restructuring process that focused the company on their core competencies in the commercial truck market, Meritor recovered from an all-time low stock price of $0.32 in March 2009 to $16.49 in May 2011. The process included shedding their light vehicle assets, cost reductions, restructuring debt and stabilized and improved working capital performance.
The global meltdown in 2009 and resulting implosion in vehicle sales pressured everyone in the supply sector. More than half of the top U.S. automotive suppliers faced bankruptcy. AAM avoided bankruptcy and is now the 19th largest automotive supplier in North America.
AAM attributed the company's survival to its ability to adapt to change and drive performance. By completing its restructuring efforts outside of bankruptcy, AAM was able to preserve a substantial amount of enterprise value for many key stakeholders.
"In 2008 and 2009, the entire auto industry was being reset," said Dauch. "AAM's Resize, Restructure and Recovery business plan triggered a series of extremely difficult but necessary actions targeted at returning AAM to market cost competitiveness, viability, profitability and sustainability."
The Detroit Medical Center had lost nearly $500 million from 1998-2003 and had announced plans to close Detroit Receiving and Hutzel hospitals, before hiring CEO Duggan and the current management team in January 2004. Through the hard work of all 12,000 DMC employees, the hospital system returned to profitability in 2004 and has operated in the black for seven straight years. The development of several nationally prominent services like cardiology, sports medicine, and pediatrics, combined with efficient cost cutting, has produced these long-term results.
During a particularly difficult year in 2009, the employees displayed a remarkable show of unity, with 96% voting at employee forums to take a one-year wage freeze in order to make it through the year without layoffs.
In 2011, Vanguard Health Systems purchased Detroit Medical Center, resulting in a commitment of $1.5 billion in investments and acquisition of all debts and pension obligations. It was the largest investment in the history of the City of Detroit.
About Meritor
Meritor, Inc. is a leading global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. With more than a 100-year legacy of providing innovative products that offer superior performance, efficiency and reliability, the company serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers in more than 70 countries. Based in Troy, Mich., more than 11,000 employees are located in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offices worldwide. Meritor common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. For more information, visit the company's web site at meritor.com.
About American Axle Manufacturing
AAM is a world leader in the manufacture, engineering, design and validation of driveline and drivetrain systems and related components and modules, chassis systems and metal-formed products for trucks, sport utility vehicles, passenger cars and crossover utility vehicles. In addition to locations in the United States (Indiana, Michigan, New York, Ohio, and Pennsylvania), AAM also has offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, South Korea, Sweden, Thailand and the United Kingdom.