As a member of the management board of a listed German industrial group, the current interim manager was commissioned by the group's management board to restructure a subsidiary in the automotive supplier industry (Tier 1 and Tier 2) that had fallen into crisis due to his specialist and leadership expertise in investment management.
The company manufactured prototypes and small series of body shell and structural parts. Its services ranged from tool design, CNC machining and toolmaking to finished sheet metal parts made from coated and uncoated steel and aluminum sheets and their assembly on universal industrial robots for gluing, folding, riveting and welding. The company generated turnover of between seven and 15 million euros.
Large order had pushed the company to its limits
The company had fallen into a crisis due to a large order (OEM/Tier 1) that affected its organization, technology, earnings and liquidity. The comparatively simple reason: the organization was not prepared for the implementation of this large order with a tenfold increase in the variety of parts. This applied to everything from order acceptance and pricing to design, prototyping, tool production and assembly cell provision to other operating and auxiliary resources. The processes for production, purchasing and procurement as well as production start-up through to the production release of a small series while safeguarding the SOP (Standard Operating Production) were all not scalable accordingly.
Creating transparency and securing liquidity with immediate measures
The interim manager was required to first create transparency in order to overcome the crisis. He therefore initiated the following measures:
- Creating reliable calculation values for all components through to saleable items
- Establishing an internal key performance indicator system for daily production monitoring
- Introducing suitable project management
- Formative, reliable monthly financial statements
Securing liquidity as a prerequisite for crisis management
In order to overcome the crisis, it was also essential to secure the liquidity situation. The interim manager defined the following measures:
- Bottom-up planning including liquidity analysis (scaled to month, week and day)
- Reduction of working capital in the area of receivables and inventories
- Crisis-appropriate communication with banks, shareholders, suppliers and customers.
Meanwhile, a technical team led by the Managing Director focused on recruiting and qualifying personnel, planning and optimizing production processes and supplier support.
Developing verifiable cost reduction models for price renegotiations
In order to identify profit and loss drivers at item and customer level, it was essential to create a planned cost accounting sheet based on actual costs. The interim manager contributed the necessary expertise. The planned budget was to be integrated into a closed system of budgeting up to the P&L, taking into account imputed costs and capacity utilization. With this calculation basis, measures to reduce losses in procurement, production and pricing could be developed. The interim manager's aim was also to be able to enter into price renegotiations with the customer with verifiable cost reduction models.
The calculation results could also be used for the valuation of current assets in order to increase the informative value of monthly financial statements in finance and accounting. The previous value-based inventory estimate could thus be replaced.
Designing and establishing a meaningful KPI system
In order to establish a meaningful daily and weekly KPI system in the company, the interim manager worked with the management to initiate measures in production planning and control. Existing work plans and parts lists, as well as those still to be developed, were to be transferred to an existing ERP system. This data was used to plan materials, employees and technical resources in conjunction with the monthly, weekly and daily call-offs provided by customers in a way that could be repeated at any time. The interim manager also installed a weekly forecast to compare material availability, output quantities, quality characteristics and deliveries (backlogs) on a daily basis. The resulting KPI system was also able to provide valuable information for measuring the success of rationalization measures in production.
Driving forward the transparent processing of the monthly financial statements
In order to transparently process the monthly financial statements, the interim manager initiated monthly routines for accounting accruals and deferrals (cut-off, provision valuation and Excel-based, rolling plan income statements including liquidity forecast). The interim manager provided technical guidance for this work in agreement with the finance, accounting and controlling departments.
The diversity and complexity of the parallel measures pushed the commercial teams to their limits. The interim manager used his communication skills and motivational leadership style to moderate peak workloads and successfully unite the teams around the common goal.
Liquidity planning based on reliable monthly financial statements
Together, we succeeded in establishing solid financial and liquidity planning based on meaningful and reliable monthly financial statements. As a result, the company was able to identify liquidity surpluses and shortfalls. Internal and external observers of the company were provided with a solid basis for assessing the company's situation, in particular its balance sheet structure and earnings and liquidity situation. As a result, the company was now in a position to conduct negotiations with suppliers, customers (price increases), banks and shareholders to overcome the liquidity bottlenecks on a sound basis.
Recognizable successes in securing the financial and liquidity situation were achieved in cooperation between the interim manager and the commercial director, firstly through the implementation of genuine factoring and secondly through the commissioning of a purchasing consultancy. The advice had a positive effect in the form of delivery interval reductions, adjustments to payment terms and the use of price and volume advantages.
Successful integration of major customer into working capital financing
In summary, the interim manager's involvement resulted in a strong team effort to provide financial support for the company by the shareholder. The major customer was integrated into the working capital financing, price increases and purchasing advantages were achieved. Liquidity was secured through factoring, and the production processes were made measurable and continuously improved.
In the further course, the company was transferred to a typical medium-sized shareholder structure on the basis of solid planning in a management buy-out (industry expert and automotive specialist) and has been continued to this day. This would not have been possible without the necessary transparency.
