The Strategy, the Fight, and Emerging Victorious

Pretty Products President Jeffrey Willis calls the company’s community Victory Garden the most important part of the green strategy. “Everybody works in it.” The crops are distributed for free to all employees and to the community. Inset left: Willis tills, plants, and cultivates the garden right along with everyone else. Inset right: Plant Manager Willie Flowers is busy dreaming up lean
and green products and processes while preparing the soil for planting. “If someone had told us four years ago what this was going to be, we would have said, ‘No one makes that kind of journey.’”

Pretty Products’ plant is located on a 32-acre campus. On the western edge of the expansive property is a 3-acre vegetable garden, symbolically named Victory Garden.

Company President Jeffrey Willis provides the seeds, fertilizer, water, tilling equipment, and so forth. Then he, Plant Manager Willie Flowers, CFO John Hawkins, and the employees all take their turns tending it. The crops then are made available to employees and to the community at large for free.

“Our Victory Garden is the most important part of our green strategy,” Willis said. “Everybody works in it. We’re more proud of that garden than a lot of other things we’ve done because it affects people’s lives directly.”

Too, the garden is emblematic of the manufacturer’s struggle, and the success it has harvested. “When I bought this company, it was broken,” Willis said. “I thought that if we brought some strategy to the company, innovated it, maybe we could create ‘next practices’ and turn it around. That was my goal.”

Willis and his team have turned over the dirt, tilled, tended, and cultivated the company. They grew something that had not grown there before. They harvested the potential of employees and the company itself.

And then they pulled the company out of the rut it was in and brought it back to profitability within four years with green, lean, and innovative strategies.

It was that kind of change management that landed Willis on the pages of The Economist, Wall Street Journal, Bloomberg News, and Harvard Business Review as part of Harvard’s Business School ad campaign. He was selected to epitomize the business acumen of the Ivy League college’s three-year Owners, Presidents, and Managers (OPM) advanced-degree program.

But change is rarely easy. Turning the company over from red to black—with green as the seedstock—was a struggle of continental scale. Flowers said, “If someone told any of us four years ago what this was going to be, we would have said, ‘No one makes that kind of journey.'”

Change the company did, but not without railing against the elements and with this carefully calculated, multistep strategy.

1. Created New Customer Base

Part of the turnaround strategy was the exit of some of Pretty Products’ biggest customers.

“When I bought the company in 2007, [two customers] comprised al-most $30 million in sales of this company,” Willis said. “We felt that the business models in place with [them]—from what we could see from our years of experience—were destructive.

“They did not form partnerships with their suppliers. Their suppliers were another form of financing for them.

“Getting contracts required continual cost reductions, which the previous owners had continued to give them. That leaves you no money for innovation or infrastructure refinement. You’re basically just trying to get them parts for a cheaper and cheaper price. Their car prices had increased significantly in the last 10 years, but they held us to 10-year-old pricing. They wouldn’t accept price increases, yet rubber prices were increasing weekly. It was an insane battle.

“The company was losing more than $1 million a month. We had restructuring costs that we were trying to shoulder and stay on our strategy. There was a great chasm of insensitivity from these kinds of customers. They would rather drag you into death by virtue of contract than make a change,” Willis said.

“The mindset of some of these Old Domestics—and hopefully some of that has changed now—was that they didn’t care who they stepped on.”

But this mat-maker is no doormat.

“I said, ‘Look, we’re going to roll the dice. We’ll ask them to leave because they just don’t seem to be receptive to innovation and change—and that’s our strategy.’ We said, ‘Either you accept a price adjustment or your tools will be on the street. If you want to go to court, let’s go. We’ve been in worse fights than this.’ So we exited out of the Old Domestics before they filed. It came to a showdown and a faceoff. It was horrific.” He added, “When you’re willing to make changes to this extent, you have to be willing to change everything.”

“We didn’t give up $30 million of business. We gave up $17 million of losses,” Hawkins said. “So getting out of them was the best strategy for us to survive.”

“Then we concentrated on the stable segment of the automotive space— Subaru, Honda, Toyota, and Hyundai,” Willis said.

“When I disclosed my business plan to them, they said, ‘Jeff, your destiny’s tied into ours. We’ll work with you.'”

2. Rebuilt Infrastructure, Corporate Culture

Willis said the company hadn’t had an organized infrastructure for a long time. “So we had cultural differences that were almost impossible to overcome. They had a culture of no real innovation, no motivation for innovation. They were staffed largely with people who thought, ‘If rubber mats are what we make, then let’s keep doing that. We’ll just keep this thing going as long as we get a paycheck.’

“Pretty had been steeped in old technology, old processes, and Old Domestics. We’d had 700,000 square feet in Ohio and another 150,000 or so in Tennessee, all making rubber-based products that we did not see a future in,” Willis said.

“So the biggest challenge was the fight to introduce a new way of life for this company—and it was a fight.

“We had management that was literally working against any changes whatsoever. We had an executive who said, ‘If you don’t give me a $75,000 bonus payment, I’m going to call all of your customers and suppliers and your new bank and tell them that you’re not going to make it.’ And he was stupid enough to do it. And we had to prosecute him. So that was a horrific issue.”

3. Consolidated Facilities

Willis concluded that he needed to consolidate manufacturing, operations, and R&D under one roof.

“We had a culture in Tennessee that was operating by the seat of their pants. They didn’t like the group in Ohio, the Ohio group didn’t like them, and nobody liked this place, so we had that issue,” Willis said. “We had Subaru backed up to the point where we had tens of thousands of mats that they needed in order to sell cars that we couldn’t give them because…”

“… we couldn’t get the rubber out of our plant in Ohio to ship to the plant in Tennessee to make them,” Flowers said. “They would send it from the plant in Ohio, and they would say, ‘It’s perfect.’ They’d get it to Tennessee where it was hot and humid, they’d run the product, and they’d call Ohio and say, ‘This doesn’t run here.’ So this would just go back and forth to the point where we owed Subaru over 30,000 units.”

“It was a civil war,” Hawkins said.

The state of Georgia offered Willis financial incentives that would help the company upgrade the LaGrange facility and equipment if Willis would make it its corporate headquarters. “They said they would make an investment in the way of a renovation bond, so we could bring this facility back to life. So we decided to take the one-time hit, shutter those factories, get out of unions, and get down here under one facility.”

The employees at the shuttered plants were upset about losing their jobs, understandably. “The unions revolted. But we would have been out of business and they would have been out of a job anyway. We certainly would not be in business today had we stayed with the status quo,” Willis said.

4. Created Next Practices

The garden is emblematic of the manufacturer’s struggle and success.

And then 2008 happened.

“When ’08 hit … first quarter, raw materials went through the roof. Second quarter, credit market dried up. Third quarter, the global economy collapsed, all while we were trying to create a new culture, close plants and get under one roof, deal with losses, improve our customer service, innovate ourselves, bring in new products …

“We were still largely in rubber, and trying to make the leap with these new products,” Willis said.

“A paradigm shift was upon us, and we had to go to next practices, because rubber production certainly wasn’t working in that environment,” Willis said. “We had customers with their destinies tied into ours, sitting there, putting their cars on docks because they couldn’t sell their cars without our mats. And, as a testament to our partnership, Subaru said, ‘As painful as this is, we’re going to stay with you, but you’ve got to get us through this!'”

Flowers said, “And in October of ’08, I told the Tennessee plant to send us one compression molding tool. They put it on a pallet on Friday, we got it in this plant on Saturday—and in a weekend, not in a week—we were shipping product using a whole new technology on Monday,” Flowers said.

“We made the change, then gave Subaru a price reduction because we found a more efficient way to do it,” Willis said.

5. Upgraded Equipment

Part of Willis’ turnaround strategy was to upgrade equipment to be in a better position to make new products. “In the middle of everything in 2008, I wanted to purchase two state-of-the-art injection molding machines,” Willis said. “But there was no one extending terms of credit in 2008 once the global economy collapsed. Banks weren’t lending. Automotive companies were in trouble. So you couldn’t get credit.

“Well, the difficult takes time; the impossible just takes a little longer, as the saying goes. We needed to get those machines in here.”

“We had an outside supplier running our injection-molded products,” Flowers explained. “And we got to the point where we said, ‘OK, we’re outsourcing all of this injection molding and getting killed, because the shops had cut favored deals with the previous management.’ We did a kaizen and figured out how to do with two machines what they were doing on five.”

“So I said, let’s get them,” Willis said. “We went for it with that strategy and were able to successfully negotiate a way to get them financed. And that was painful, because the plant had to be modified, and we had to do testing to make the customers comfortable.”

6. Cleaned up the Books

Hawkins had the task of making sense of the scattered accounting and bookkeeping. “We weren’t even able to do financial statements, because those were set up in Ohio. There wasn’t anybody out there providing any support. They all quit. Anyone at any level of experience in Ohio, literally in a matter of two weeks, was gone,” Hawkins said.

“There was no system generating reports,” Hawkins continued. “And so I started digging into the database and pulled these reports together. Everybody was shocked as to how much they were losing on these products.”

“They didn’t know,” Willis said. “They were bidding on new business without an accurate cost of overhead. Prior to our acquiring Pretty Products, they were losing on every bid.”

“On top of that, when I got here, Pretty had a self-funded medical plan that was a disaster,” Hawkins said. “And the people in the plant, the meat of the company, had the worst benefits. They couldn’t get any kind of preventive. You could only spend $100,000 in a lifetime on your health care. It was that much of an inequity. It was like something out of ‘Norma Rae.'”

7. Dealt With Cash Flow Crunch

And then GM and Chrysler filed bankruptcy. “We were largely out, but they left owing us a lot of money, and suppliers that provided raw materials to us for these customers wanted their money that we never collected from GM and Chrysler. So we had to negotiate and strategize to clean up our balance sheet. And a lot of it was with my own money from the proceeds of other companies I had owned and divested in,” Willis said.

“It got so bad in the summer of ’08, we couldn’t get access to revolving credit, even from suppliers,” Hawkins said.

“One supplier said they wanted $73,000 a week, with no terms,” Willis said. “John [Hawkins] had to manage our operations costs with virtually no supplier terms. None.”

“And still continue R&D, still buy raw materials, fund the payrolls, fund legal, fund travel, all that,” Flowers added.

“It was a model from hell,” Hawkins said.

Flowers said, “Our motto was ‘Come on if you’re comin,’ because the phone would ring, and it would be somebody with something out of the blue.”

“And something horrific!” Willis said.

“Yeah, like, ‘We need $300,000 this afternoon,'” Hawkins said. “It would be a carpet supplier that was also a competitor that made carpet mats. ‘Either you pay it or we’re not going to supply you, and we’ll shut your customer down.’ Well, it’s $10,000 every 60 seconds to shut down an assembly line. And they were constantly saying to our customers, ‘They’re not going to make it.’ So we had that threat constantly over us.”

Controlling Destiny

“We had the demeanor to take the fight,” Willis said. “I mean, the tougher it got, then let’s go. We came from the streets and we know how to survive. And if we’re going to fight, you’d better be prepared to accept the worst of it.”

Flowers said, “The only people who had confidence that we’d achieve the goal were us.”

“We said, ‘Look, this is our destiny and we’re going to control it,'” Willis said. “Anytime you put your destiny in the hands of a third party, you’ll lose 100 percent of the time. We have the education and background and determination and motivation to transcend all that. And aside from that, we’re decent people. We’re doing the right things.

“We did that, and we’ve returned to profitability and stayed profitable from that day ever since,” Willis continued. “We took our green, sustainable strategy to another level; got under one roof; bought new equipment; I continued to put money into R&D personally to make sure that we developed this. And when we emerged, John and his team guided us through the strategic financial challenges of recovering in ’09 to keep us profitable.

“Got into 2010, shed debt, eliminated some of our suppliers by recycling our offal, built back up our credibility with our customers in terms of delivery, quality, cost, and overall customer satisfaction—we had dropped down in some cases to 50 percent [QDC] in the middle of ’08—and fought and clawed to stay with our customers, and they stayed with us.

“We’re 100 percent [QDC] now with Honda, and our quality comes back 100 percent with Toyota,” Flowers said. “Subaru recently sent down seven of their top executives, sales, and engineering people to see what we’ve done. After the tour, some of them were almost emotional. They said, ‘You have restored the credibility—and you will be getting new contracts,’ and they followed through,” Willis said.

“So you now know the pain. Now you know the whole story. It has been some kind of ride,” Willis said. “But our customers respect us now. Honda and Subaru and all of those people stuck their necks out and stayed with us.

“So all of that was painful, but we stayed with our game plan to return to its profitability on schedule,” Willis said.

“We’ve had profit every consecutive month since March 2009,” Hawkins concluded.

Green Strategy

“Our strategy to go green was never a risk in our minds, but there were times when it was very intense. Ultimately, the team always supported one another. Plus, we had a bank that supported us,” Willis said.

“Our green and sustainable processes, green initiatives … they all make great business sense,” Willis said. “We really believe that we have a plan that’s going to lead to where the future is going. We know it’s going to work because the global economy is going to be tied to sustainability. You can’t keep using what’s never going to be replaced and expect to sustain.

“If you had your choice of a traditional set of mats or a sustainable, green mat, and if there were no price difference, which one would you choose? It would be a green mat, hands down.”

Hawkins said, “There’s a church hymn that says, ‘I never lost my hope.’ I think that would be us, because we knew it would work eventually.

“Every problem we solved, whether it’s engineering, manufacturing, financing, is always part of a paradigm shift,” Hawkins said. “There was nowhere to look it up. But our mantra is failure is not an option. Figure it out.”

“For one, we’re too old,” Willis said with a smile. “We’ve staked our futures and our careers on this as well. We’re all in our 50s here. We can’t be spending time starting over. This is it.

“We’ve come together as a community of us that are at this season of our lives and say, ‘This is how we’re going to make that last impression in our professional lives. We’re going to have an impact on our community, our region, our nation, and our society.’ And that’s how we roll,” Willis said.

Harvesting the Fruits of Labor

Like the harvest from the Victory Garden, the company’s success is shared companywide. Before the turnaround, employees had held prayer sessions to pray for the company. Willis, Flowers, and Hawkins are keenly aware that the company’s fate has ramifications for everyone.

The men felt a moral imperative to return the company to prosperity. “By letting innovation go, they [the previous owners] became complacent and careless at the peril of everybody else in this factory,” Willis said.

“As an owner, you realize, man, their destiny’s tied into yours. You can’t be fooling around here. It matures you a pretty good bit.

“It’s refreshing now to be at a point where we don’t have much debt, we have great products, we’re at the cutting edge of an evolving strategy, we have new market share, supplier terms, new contracts are being offered … the old Pretty is behind us.

“Now, when we have an employee who comes in to us and says, ‘We’re closing on our home,’ or ‘We bought a new car,’ or ‘I’m sending my son to college,’ that’s what really gives you self-pride; that they have confidence here that we’re doing the right thing,” Hawkins said.

“We never lost sight of our social and civic commitments. Although our community Victory Garden was a big undertaking, even through the worst of times, we were out there planting it and giving back to feed all of our workers and the community,” Flowers said.

“The best feeling now is not just that we’re making a profit—it’s that we did it. We did it, and it’s beginning to show. And that’s something to be proud of—for us, and for all these people out there who had prayer sessions for us,” Willis said.

“So that’s who we are,” he continued. “We’re proud of these products, we’re proud of the green initiatives, but we’re more proud to still be standing.

“And the best, really, is yet to come.”