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Restructuring in Germany
Contents
Introduction 1
Some short case studies 1
Belden Wire and Cable 1
Coats 2
FKI/DeWind 2
Thorn Licht 3
Carrier Refrigeration UTC 3
Some other restructuring experience in the United Kingdom 4
KION Group 4
Thorn Lighting – Spennymoor 4
Collinson Grant 6
Skills – the sort of work we do 6
Our skills 6
Summary 7
Restructuring in Germany
1
Introduction
Collinson Grant has substantial experience of restructuring in Germany and
other mainland European countries. This includes assignments to reduce
costs, close factories, manage redundancies, reconfigure operations and
improve operating performance. Our work in Germany has been for well
known, multi-national companies. For example:
BASF Polyurethanes – support to optimise the network of
manufacturing sites for basic products and polyurethane systems for
the regional businesses in Europe, North America (NAFTA) and Asia
Belden Wire and Cable – restructuring, sale of part of the business
and partial factory closure (Villingen) and transfer of operations to
the Netherlands
Cambro - improving efficiency in the European supply chain
(Moerdijk and Wendlingen)
Carrier Refrigeration UTC - supporting the restructuring of human
resources and reconfiguration of the logistics networks - in the Czech
Republic, Germany and Hungary
Coats – an evaluation of the options for the manufacturing site at
West Rhauderfehn
Federal Mogul - reduction of overhead costs (Nürnberg)
FKI/DeWind – business reorganisation, partial site closure and
managing redundancies (Lübeck)
Rizla (Imperial Tobacco Group) - factory reorganisation (Stuttgart)
Rolls-Royce Deutschland - reducing overhead costs (Oberursel and
Dahlewitz)
Rockwood Pigments - profit improvement and factory controls
(Walluf)
Thorn Licht - restructuring European operations and interim
management (Neheim).
Some short case studies
Belden Wire and Cable
Belden is an American corporation, based in St Louis. It manufactures high-
speed electronic cables in Asia, Europe and the United States. Sales are
around $2 billion a year.
A subsidiary, Belden Wire and Cable, recognised that it had excess capacity in
Europe. It decided initially to close the plant in Germany and to transfer
some, but not all, of its production to the company’s main European factory in
2
Venlo in the Netherlands. 180 jobs were under threat. During the planning of
the closure, the company allowed its managers to propose a Management Buy
Out (MBO). This led to their successful purchase of some of the remnant
business. But it complicated the consultations with the Works Council and
might have caused delay and additional cost. We led the whole restructuring
process and facilitated the timely transfer of production - on time and within
budget.
We provided local, expert advice on German employment law and custom and
practice. Our consultants drew up the social plan and supporting documents;
worked out the cost of redundancies; dealt with sensitive communications; and
led the negotiations with the works council and trades unions. The company’s
American managers, in the US and in Europe, needed considerable help in
understanding the terminology and approach necessary to effect the
redundancies without incurring legal sanction and high additional costs. We
acted as an important bridge between the local and American managers.
Although the original financial provision made in the US turned out to be
wrong, the whole exercise was concluded satisfactorily, within the revised
budget and on time.
Coats
Coats has an international reputation as a manufacturer of sewing threads and
related products. It makes and supplies the world's favourite high performance
corespun, general purpose spun polyester threads and other speciality threads.
The company employs 22,000 people in 71 different countries.
The factory in West Rhauderfehn makes zips for garments, it had declining
sales and was losing money. There was little prospect of any significant
improvement in trading conditions. We were asked to review the business and
evaluate different options for the future. The possibility of a two-stage
exercise to close the plant had already been considered – but this would have
been difficult to achieve operationally as well as requiring significant
additional investment. Our work concentrated on three inter-related work
streams – Operations, Human Resources and Financial Modelling. The
copious data were examined in the context of five potential options from 'Do
nothing' to 'Reconfigure the business and put it on a sustainable footing'. We
prepared a financial analysis for each case and sets out the risks and potential
opportunities. Additional models of costs, activities and processes provided a
fuller picture. It allowed us to show projected trading performance in five
years' time and a Net Present Value for the derived benefits and necessary
investment for each option.
Our findings were a mix of the options under review. They presented a viable
alternative to closure with a staged approach to restructuring and investment
– and a potential return to modest profitability.
FKI/DeWind
FKI is an international engineering group, now owned by Melrose PLC. It is a
world leader in its specialised businesses - Lifting Products and Services,
Logistics, Hardware and Energy Technology. There are over 14,000
employees, principally in Europe and North America.
Restructuring in Germany
3
DeWind had been acquired by FKI in 2002. Its staff of 244 designed and
assembled wind turbines in Germany. Trading conditions changed rapidly
after the acquisition, exposing a relatively weak market position. Prospects
for profitable performance declined. We were asked to devise and then assess
options for the business. These included the prospects for trading back into
profitability, downsizing to restore equilibrium between costs and revenues,
and a number of different scenarios for withdrawal. One complication in all of
these options was the contractual obligations for warranties, remedial
engineering work and maintenance contracts. A clean ‘closure and walk
away’ option was not possible.
We evaluated an agreed sub-set of the possible options, and recommended a
restructuring plan that closed for new business but which retained a residuary
service organisation. The company accepted our advice and asked for our help
in scaling back the operation. We prepared the social plan, managed the
negotiations with the works council and local officials, and handled the
subsequent programme of redundancies. The aim was to achieve a
satisfactory balance between the length of time taken to get agreement and
the cost at which it was achieved (a key consideration in Germany). During
the later stages of the reorganisation, we provided transitional managerial
support to improve the performance of the service business and some other
internal functions. This was successful and improved the position significantly
enough that FKI was able to achieve a trade sale of the rationalised business.
Thorn Licht
Collinson Grant has had a long relationship with Thorn Lighting, which is now
a division of Zumtobel (Austria). The Group markets commercial and
architectural lighting throughout Europe and South-East Asia. We worked
with the senior management team to implement a new manufacturing strategy
throughout the European plants – in France, Germany, Scandinavia and the
UK. At Thorn Licht, we restructured operations and improved profitability by:
re-configuring the layout of the factory floor to reduce costs and non
value-added activities
re-designing jobs to eliminate the old demarcations between direct
and indirect activities
flattening the management structure and creating greater
accountability.
We acted as interim managers for a period of nine months to support local
managers in consolidating the necessary changes.
Carrier Refrigeration UTC
Carrier Refrigeration is part of United Technologies (USA). It had acquired
the commercial refrigeration business of Linde AG, which had plants in
Hungary, Germany and the Czech Republic. After a review of performance,
managers decided to close the German sites and move their operations to
Beroun and Myto in the Czech Republic and Jászberény in Hungary.
Collinson Grant provided support to the restructuring, focusing particularly on
the management of human resources and the improvement of logistics systems
4
and operations. There was an urgent need to support the management team in
Jászberény, as the inbound logistics processes were failing to match the needs
of lean manufacturing methods that had been recently introduced. As a
consequence, output was significantly below target and customers’
requirements. We provided ‘hands on’ support on a day-to-day basis and
improved the capabilities of the supply chain organization to meet the new
demands placed on it.
Some other restructuring experience in the United
Kingdom
KION Group
The KION Group is an international provider of forklifts, warehouse
equipment and other industrial trucks, and the market leader in Europe. It is
based in Wiesbaden, Germany. The British subsidiary is Linde Material
Handling (UK), which has 2,800 employees and sales of around £550 million.
There is a head office, two manufacturing sites, twenty-three regional service
centres and nine national sales and service companies. Our work centred on
two distinct projects:
Creation of a new shared service centre (SSC).
Improving the performance of the sales and service companies.
We reviewed the effectiveness of all ‘back office’ operations, compared
performance at different sites and pinpointed examples of good practice. By
consulting widely and thoroughly, we established a consensus for change. The
implementation of the SSC was phased over two years and cut the staff by
20% in Finance and 15% in HR. The work in the sales and service companies
consolidated the regions, reduced the number of service staff by 12% and
found opportunities to improve profit by £3.3 million.
Thorn Lighting – Spennymoor
The Zumtobel Group provides professional lighting equipment under its
Zumtobel and Thorn brands. Thorn Lighting employs 3,000 people in Europe,
Asia and Australia and has sales of €500 million. It is the market leader in
the UK. Thorn’s sprawling main plant in County Durham suffered from too
many manufacturing halls, large internal distances to cover, and poor process-
flows.
So Thorn was ready to move to a new, technically advanced factory on a
brown-field site. But in the economic slowdown, big savings had to be made
to justify the business case for the move. We were asked to reconfigure the
business to save £3.5 million in overheads and staffing, direct and indirect.
We worked closely with the client to create a series of vital projects:
to design the shop floor to reduce complexity and achieve the most
efficient flows of material and information
Restructuring in Germany
5
to reconfigure roles, responsibilities and competences to get the best
from the new layout
to reduce overheads and analyse variable expenses to uncover costs
that could be taken out
to evaluate the culture of the business and define the changes needed
to achieve the ideal model.
We also created and managed, in addition to these projects, a project office
responsible for controlling the physical move to the new site. We set
milestones and planned resources and accountabilities for all aspects of the
move. The structure for communicating with and reporting to all stakeholders
was clearly defined.
Thorn Lighting's award winning Spennymoor factory
Thorn saved even more than the £3.5 million originally hoped for. On-time
delivery was increased, with fewer variances in labour or materials. And the
organisational structure is now the model for the group’s other sites. The
ultimate confirmation of our success was the award - at the Best Factory
Awards run by Cranfield School of Management with the magazine, Works
Management - of the accolade, Factory of the Year 2009. Dr Marek
Szwejczewski, the Director of the awards, said:
‘Thorn Lighting stood out for its attention to quality, cost and delivery. Its
Spennymoor factory is extremely customer focused and its performance has
been so good that it is bringing products back to the UK from overseas plants.’
6
Collinson Grant
Collinson Grant has been helping large companies to integrate acquisitions
and restructure businesses since the early 1980s. We help firms all over
Europe and in the United States to reduce costs, improve performance and
profit, and manage people. This builds long-term relationships. We have kept
some clients for over thirty years.
Our emphasis is on results and value-for-money. We expect to give a first
class return on the investment in us. So we do not recommend action unless
we are sure that the outcome will be worth it. We are not afraid to give bad
news, or to champion ideas that may not be welcome.
Skills – the sort of work we do
Most of our work is on three themes – organisation, costs and people. We use
this simple framework to manage complex assignments - often with an
international dimension - and to support managers on smaller, more focused
projects. We help them:
to restructure and integrate - following acquisitions or to improve
profits. Our work includes: closing sites and relocating operations;
drafting social plans; leading negotiations with the staff and its
representatives, local politicians and officials; handling redundancies
and managing communications
to improve the supply chain. We examine every process and interface
to improve efficiency and service
to set up financial and managerial controls. We create robust
systems to improve decision-making and reduce risks
to introduce lean manufacturing and refine business processes. We
analyse and improve how work is done, and use new ways to create
change and make it stick
to cut costs. We make systematic analyses of overheads, direct costs,
and the profitability of customers and products. This helps managers
to understand complexity, and to take firm steps to reduce it
to manage people. We draw up pay schemes and put them into
effect, guide managers on employee relations and employment law,
get better performance from people, and manage redundancy.
Our skills
Our consultants have very different skills and experiences. But they have all
have been senior line managers – many in multinational businesses. They can
manage firms and get the best out of processes and people. They offer sound
knowledge, fresh angles on old problems, and the personal skills to take hard
decisions.
They have various specialisms - in financial/operational analysis, in
organisational design and the supply chain, in manufacturing and operational
Restructuring in Germany
7
controls, in managing projects, or in employee relations and employment law.
They include American, Dutch, French, German consultants, and several
qualified employment lawyers – in the UK and other European countries. Our
ability to negotiate agreements directly with trades unions in the UK, France
and Germany is an important strength when leading difficult organisational
change.
Summary
Collinson Grant’s experience in managing the restructuring of European
manufacturing sites is extensive – a lot of it has been in Germany. We work
with clients in different ways, depending on their preference, the skills
available internally and the urgency for action. Our support helps clients:
to analyse the current situation – and the risks
to understand the options for change – with associated benefits and
costs
to determine the best course of action
to complete negotiations with social partners
to prepare comprehensive plans for implementation
to manage operations during periods of instability
to maintain strong cashflow
to handle redundancies effectively.
030412
33 St James’s Square London SW1Y 4JS United Kingdom Telephone +44 20 7661 9382 Facsimile +44 20 7661 9400
Ryecroft Aviary Road Worsley Manchester M28 2WF United Kingdom Telephone +44 161 703 5600 Facsimile +44 161 790 9177
Web www.collinsongrant.com www.collinsongranthr.com

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Restructuring in Germany

  • 2.
  • 3. Contents Introduction 1 Some short case studies 1 Belden Wire and Cable 1 Coats 2 FKI/DeWind 2 Thorn Licht 3 Carrier Refrigeration UTC 3 Some other restructuring experience in the United Kingdom 4 KION Group 4 Thorn Lighting – Spennymoor 4 Collinson Grant 6 Skills – the sort of work we do 6 Our skills 6 Summary 7
  • 4.
  • 5. Restructuring in Germany 1 Introduction Collinson Grant has substantial experience of restructuring in Germany and other mainland European countries. This includes assignments to reduce costs, close factories, manage redundancies, reconfigure operations and improve operating performance. Our work in Germany has been for well known, multi-national companies. For example: BASF Polyurethanes – support to optimise the network of manufacturing sites for basic products and polyurethane systems for the regional businesses in Europe, North America (NAFTA) and Asia Belden Wire and Cable – restructuring, sale of part of the business and partial factory closure (Villingen) and transfer of operations to the Netherlands Cambro - improving efficiency in the European supply chain (Moerdijk and Wendlingen) Carrier Refrigeration UTC - supporting the restructuring of human resources and reconfiguration of the logistics networks - in the Czech Republic, Germany and Hungary Coats – an evaluation of the options for the manufacturing site at West Rhauderfehn Federal Mogul - reduction of overhead costs (Nürnberg) FKI/DeWind – business reorganisation, partial site closure and managing redundancies (Lübeck) Rizla (Imperial Tobacco Group) - factory reorganisation (Stuttgart) Rolls-Royce Deutschland - reducing overhead costs (Oberursel and Dahlewitz) Rockwood Pigments - profit improvement and factory controls (Walluf) Thorn Licht - restructuring European operations and interim management (Neheim). Some short case studies Belden Wire and Cable Belden is an American corporation, based in St Louis. It manufactures high- speed electronic cables in Asia, Europe and the United States. Sales are around $2 billion a year. A subsidiary, Belden Wire and Cable, recognised that it had excess capacity in Europe. It decided initially to close the plant in Germany and to transfer some, but not all, of its production to the company’s main European factory in
  • 6. 2 Venlo in the Netherlands. 180 jobs were under threat. During the planning of the closure, the company allowed its managers to propose a Management Buy Out (MBO). This led to their successful purchase of some of the remnant business. But it complicated the consultations with the Works Council and might have caused delay and additional cost. We led the whole restructuring process and facilitated the timely transfer of production - on time and within budget. We provided local, expert advice on German employment law and custom and practice. Our consultants drew up the social plan and supporting documents; worked out the cost of redundancies; dealt with sensitive communications; and led the negotiations with the works council and trades unions. The company’s American managers, in the US and in Europe, needed considerable help in understanding the terminology and approach necessary to effect the redundancies without incurring legal sanction and high additional costs. We acted as an important bridge between the local and American managers. Although the original financial provision made in the US turned out to be wrong, the whole exercise was concluded satisfactorily, within the revised budget and on time. Coats Coats has an international reputation as a manufacturer of sewing threads and related products. It makes and supplies the world's favourite high performance corespun, general purpose spun polyester threads and other speciality threads. The company employs 22,000 people in 71 different countries. The factory in West Rhauderfehn makes zips for garments, it had declining sales and was losing money. There was little prospect of any significant improvement in trading conditions. We were asked to review the business and evaluate different options for the future. The possibility of a two-stage exercise to close the plant had already been considered – but this would have been difficult to achieve operationally as well as requiring significant additional investment. Our work concentrated on three inter-related work streams – Operations, Human Resources and Financial Modelling. The copious data were examined in the context of five potential options from 'Do nothing' to 'Reconfigure the business and put it on a sustainable footing'. We prepared a financial analysis for each case and sets out the risks and potential opportunities. Additional models of costs, activities and processes provided a fuller picture. It allowed us to show projected trading performance in five years' time and a Net Present Value for the derived benefits and necessary investment for each option. Our findings were a mix of the options under review. They presented a viable alternative to closure with a staged approach to restructuring and investment – and a potential return to modest profitability. FKI/DeWind FKI is an international engineering group, now owned by Melrose PLC. It is a world leader in its specialised businesses - Lifting Products and Services, Logistics, Hardware and Energy Technology. There are over 14,000 employees, principally in Europe and North America.
  • 7. Restructuring in Germany 3 DeWind had been acquired by FKI in 2002. Its staff of 244 designed and assembled wind turbines in Germany. Trading conditions changed rapidly after the acquisition, exposing a relatively weak market position. Prospects for profitable performance declined. We were asked to devise and then assess options for the business. These included the prospects for trading back into profitability, downsizing to restore equilibrium between costs and revenues, and a number of different scenarios for withdrawal. One complication in all of these options was the contractual obligations for warranties, remedial engineering work and maintenance contracts. A clean ‘closure and walk away’ option was not possible. We evaluated an agreed sub-set of the possible options, and recommended a restructuring plan that closed for new business but which retained a residuary service organisation. The company accepted our advice and asked for our help in scaling back the operation. We prepared the social plan, managed the negotiations with the works council and local officials, and handled the subsequent programme of redundancies. The aim was to achieve a satisfactory balance between the length of time taken to get agreement and the cost at which it was achieved (a key consideration in Germany). During the later stages of the reorganisation, we provided transitional managerial support to improve the performance of the service business and some other internal functions. This was successful and improved the position significantly enough that FKI was able to achieve a trade sale of the rationalised business. Thorn Licht Collinson Grant has had a long relationship with Thorn Lighting, which is now a division of Zumtobel (Austria). The Group markets commercial and architectural lighting throughout Europe and South-East Asia. We worked with the senior management team to implement a new manufacturing strategy throughout the European plants – in France, Germany, Scandinavia and the UK. At Thorn Licht, we restructured operations and improved profitability by: re-configuring the layout of the factory floor to reduce costs and non value-added activities re-designing jobs to eliminate the old demarcations between direct and indirect activities flattening the management structure and creating greater accountability. We acted as interim managers for a period of nine months to support local managers in consolidating the necessary changes. Carrier Refrigeration UTC Carrier Refrigeration is part of United Technologies (USA). It had acquired the commercial refrigeration business of Linde AG, which had plants in Hungary, Germany and the Czech Republic. After a review of performance, managers decided to close the German sites and move their operations to Beroun and Myto in the Czech Republic and Jászberény in Hungary. Collinson Grant provided support to the restructuring, focusing particularly on the management of human resources and the improvement of logistics systems
  • 8. 4 and operations. There was an urgent need to support the management team in Jászberény, as the inbound logistics processes were failing to match the needs of lean manufacturing methods that had been recently introduced. As a consequence, output was significantly below target and customers’ requirements. We provided ‘hands on’ support on a day-to-day basis and improved the capabilities of the supply chain organization to meet the new demands placed on it. Some other restructuring experience in the United Kingdom KION Group The KION Group is an international provider of forklifts, warehouse equipment and other industrial trucks, and the market leader in Europe. It is based in Wiesbaden, Germany. The British subsidiary is Linde Material Handling (UK), which has 2,800 employees and sales of around £550 million. There is a head office, two manufacturing sites, twenty-three regional service centres and nine national sales and service companies. Our work centred on two distinct projects: Creation of a new shared service centre (SSC). Improving the performance of the sales and service companies. We reviewed the effectiveness of all ‘back office’ operations, compared performance at different sites and pinpointed examples of good practice. By consulting widely and thoroughly, we established a consensus for change. The implementation of the SSC was phased over two years and cut the staff by 20% in Finance and 15% in HR. The work in the sales and service companies consolidated the regions, reduced the number of service staff by 12% and found opportunities to improve profit by £3.3 million. Thorn Lighting – Spennymoor The Zumtobel Group provides professional lighting equipment under its Zumtobel and Thorn brands. Thorn Lighting employs 3,000 people in Europe, Asia and Australia and has sales of €500 million. It is the market leader in the UK. Thorn’s sprawling main plant in County Durham suffered from too many manufacturing halls, large internal distances to cover, and poor process- flows. So Thorn was ready to move to a new, technically advanced factory on a brown-field site. But in the economic slowdown, big savings had to be made to justify the business case for the move. We were asked to reconfigure the business to save £3.5 million in overheads and staffing, direct and indirect. We worked closely with the client to create a series of vital projects: to design the shop floor to reduce complexity and achieve the most efficient flows of material and information
  • 9. Restructuring in Germany 5 to reconfigure roles, responsibilities and competences to get the best from the new layout to reduce overheads and analyse variable expenses to uncover costs that could be taken out to evaluate the culture of the business and define the changes needed to achieve the ideal model. We also created and managed, in addition to these projects, a project office responsible for controlling the physical move to the new site. We set milestones and planned resources and accountabilities for all aspects of the move. The structure for communicating with and reporting to all stakeholders was clearly defined. Thorn Lighting's award winning Spennymoor factory Thorn saved even more than the £3.5 million originally hoped for. On-time delivery was increased, with fewer variances in labour or materials. And the organisational structure is now the model for the group’s other sites. The ultimate confirmation of our success was the award - at the Best Factory Awards run by Cranfield School of Management with the magazine, Works Management - of the accolade, Factory of the Year 2009. Dr Marek Szwejczewski, the Director of the awards, said: ‘Thorn Lighting stood out for its attention to quality, cost and delivery. Its Spennymoor factory is extremely customer focused and its performance has been so good that it is bringing products back to the UK from overseas plants.’
  • 10. 6 Collinson Grant Collinson Grant has been helping large companies to integrate acquisitions and restructure businesses since the early 1980s. We help firms all over Europe and in the United States to reduce costs, improve performance and profit, and manage people. This builds long-term relationships. We have kept some clients for over thirty years. Our emphasis is on results and value-for-money. We expect to give a first class return on the investment in us. So we do not recommend action unless we are sure that the outcome will be worth it. We are not afraid to give bad news, or to champion ideas that may not be welcome. Skills – the sort of work we do Most of our work is on three themes – organisation, costs and people. We use this simple framework to manage complex assignments - often with an international dimension - and to support managers on smaller, more focused projects. We help them: to restructure and integrate - following acquisitions or to improve profits. Our work includes: closing sites and relocating operations; drafting social plans; leading negotiations with the staff and its representatives, local politicians and officials; handling redundancies and managing communications to improve the supply chain. We examine every process and interface to improve efficiency and service to set up financial and managerial controls. We create robust systems to improve decision-making and reduce risks to introduce lean manufacturing and refine business processes. We analyse and improve how work is done, and use new ways to create change and make it stick to cut costs. We make systematic analyses of overheads, direct costs, and the profitability of customers and products. This helps managers to understand complexity, and to take firm steps to reduce it to manage people. We draw up pay schemes and put them into effect, guide managers on employee relations and employment law, get better performance from people, and manage redundancy. Our skills Our consultants have very different skills and experiences. But they have all have been senior line managers – many in multinational businesses. They can manage firms and get the best out of processes and people. They offer sound knowledge, fresh angles on old problems, and the personal skills to take hard decisions. They have various specialisms - in financial/operational analysis, in organisational design and the supply chain, in manufacturing and operational
  • 11. Restructuring in Germany 7 controls, in managing projects, or in employee relations and employment law. They include American, Dutch, French, German consultants, and several qualified employment lawyers – in the UK and other European countries. Our ability to negotiate agreements directly with trades unions in the UK, France and Germany is an important strength when leading difficult organisational change. Summary Collinson Grant’s experience in managing the restructuring of European manufacturing sites is extensive – a lot of it has been in Germany. We work with clients in different ways, depending on their preference, the skills available internally and the urgency for action. Our support helps clients: to analyse the current situation – and the risks to understand the options for change – with associated benefits and costs to determine the best course of action to complete negotiations with social partners to prepare comprehensive plans for implementation to manage operations during periods of instability to maintain strong cashflow to handle redundancies effectively. 030412
  • 12. 33 St James’s Square London SW1Y 4JS United Kingdom Telephone +44 20 7661 9382 Facsimile +44 20 7661 9400 Ryecroft Aviary Road Worsley Manchester M28 2WF United Kingdom Telephone +44 161 703 5600 Facsimile +44 161 790 9177 Web www.collinsongrant.com www.collinsongranthr.com