JW Aluminum Co. set out on a path of culture change in 2010, leading it away from a manufacturing-centric approach to one that focuses on integration and employee participation.
We set about to change the culture, the marketing, the product and the customer base, chief executive officer Lee McCarter said, noting that in 2007-08 JW Aluminum was comprised of four separate companies under one corporate umbrella. Management was more interested in buying companies than integrating them into a seamless whole.
JW Aluminum offers a range of rolled aluminum products, including sheet, fin stock, container material, cable wrap and foils in a variety of thicknesses. The company is backed by owner Wellspring Capital Management LLC, a middle-market private equity company that manages more than $3 billion of private equity capital.
Wellspring Capital acquired the aluminum subsidiary of Walter Industries Inc., now JW Aluminum, in late 2003 for $125 million. McCarter joined the company in April 2009 following a successful career as chief financial officer at a number of privately held companies, including FleetPride Inc., Woodlands, Texas, a leading supplier of heavy-duty truck and trailer parts, as well as Propex Inc., a producer of technical textile solutions, and SI Corp., both in Chattanooga, Tenn.
McCarter and JW Aluminums board began assembling a senior management team. Ron Marchbanks, who had joined the company in August 2008, was named president and chief operating officer in December 2009. Marchbanks was a 30-year veteran of the aluminum industry, having worked in a variety of operating positions for such industry leaders as Noranda Aluminum Inc., Alumax Aluminum Corp., Alcan Inc., Wabash Alloys LLC, Advanced Aluminum LLC and OmniSource Corp./Superior Aluminum Alloys LLC.
Chief commercial officer Chester Roush, another key member of the senior management team, came on board in June 2009. He brought with him three decades of experience in sales, planning and operations at Kaiser Aluminum Corp., Reynolds Metal Co., Ormet Aluminum Corp. and Precision Coil Inc.
Wesley Tomaszek, the fourth member of the team, joined as chief financial officer in summer 2011. Tomaszeks resume included a quarter-century of experience in global business finance and management with subsidiaries of Tyco International Ltd. and Mallinckrodt Inc.
As JW Aluminum entered 2010, it saw supply and demand in the aluminum flat-rolled sector fairly well balanced. These markets had seen dramatic capacity reduction through consolidation and closures through the years, McCarter said, noting that the result of the consolidations was a growing number of competitors owned by private equity investors, such as JW Aluminum, or by foreign companies. Those companies that survived the 2008-09 recession were characterized by improved performance through lean demand initiatives.
JW Aluminum adopted a lean transformation strategy to reduce the span of managerial control, improve safety and training on the factory floor, emphasize environmental savings, such as increasing the amount of scrap used, and upgrade the quality of the work force. The company centralized back-office functions to try to eliminate redundancies across the four plants.
Each day, we get a more in-depth look at our lean transformation initiatives and finding ways to improve value, McCarter said.
The company began implementing a WIN strategy in early 2010, which involved bringing every employee in the company together in a series of cross-functional meetings to share its financial results and show them how their actions could affect the bottom line. The strategy is based on the open-book management philosophy espoused by entrepreneurial gurus John Case and Jack Stack, which emphasizes sharing financial information with all employees, setting achievable goals and following up to ensure those goals are met.
The initial meetings consisted of 24 employees from every functional area of the company; JW Aluminum held 35 WIN meetings before the initial set was complete. Those initial three-day sessions were so important to help employees understand financial statements, McCarter said. There is nothing we hide from any employee.
JW Aluminum used an earnings before interest, taxes, depreciation and amortization (Ebitda) matrix to explain to employees the role they play in the companys profitability. Ebitda is a relatively simple way for a company to show employees the impact that income and expenses have on the bottom line. We put it to the employees in literally those terms, and most got it immediately, McCarter said. Companies often dont give employees enough credit. They are a lot smarter about what goes on in the workplace than most folks give them credit for.
The WIN meetings developed and documented a set of clear objectives, and newly formed employee teams were given ways to measure progress on the factory floor. Most importantly, the company established a profit-sharing program for all team members. With profit sharing, we all get a bonus or we all dont, McCarter said.
Sometimes, employees can pay lip service to cultural change, especially if they sense management isnt willing to walk the walk. That was never the case at JW Aluminum, McCarter said. Employees ran to embrace the WIN strategy. They were looking for leadership. We feel that this is a highly energized, dedicated employee base, and what we brought to the picture was clarity.
Getting the employee teams at four separate plants to come together was a key part of the strategy. Before, you had mill operators from the different plants saying this is how they do things in their plant. Once we went through the training, we were all standing shoulder to shoulder. We realized we all shared the same challenges. Now we have come together all focused as one unit rather than four plants, McCarter said.
Employee participation has become so widespread that if one of the companys four mills in Mount Holly, just north of Charleston; St. Louis; Russellville, Ark.; and Williamsport, Pa. is having problems with a particular issue, it frequently sends a team from one of the other plants to help. Customers who visit JW Aluminum plants are typically given tours by employees from the factory floor rather than from marketing or corporate communications. And employee suggestions are surging, including one from an employee on the factory floor who suggested a way to re-use wrapping bands that will save JW Aluminum $100,000 this year.
JW Aluminum also took a hard look at volume, customer base and marketing. Its all about the mix, Roush said. We stress value. Its part of our strategy.
McCarter said that the companys volume is up nearly 25 percent since 2009. Thats significant when compared to the state of the economy, he said, adding that Roushs focus on markets and competition has been a major part of that growth. Chester brought a market strategy to the table to leverage our assets vs. the volume approach we had followed in the past.
McCarter, who didnt come from a flat-rolled aluminum management background, was impressed by how JW Aluminum was small enough and flexible enough to quickly adopt a marketing strategy in which the customer was king. Some of our competitors are so large theyre drowning in red tape, he said.
To turn smallness and flexibility into a positive, JW Aluminum stressed a value-added service in its relationship with companies. Between 2009 and 2011, the company improved on-time delivery by 30 percent.
What JW Aluminum didnt have, Roush said, was a very good understanding of the marketplace or of our competition. Sales staff fanned out across the country to get a better understanding of customers and who else in the marketplace was capable of serving those customers.
In some cases early in the process, JW Aluminum found that the volume strategy employed in the past was actually costing it money. We came here not focused on volume but making sure we had the right mix to get the return on equity we wanted, Roush said, noting that one long-time customer almost left because of the companys honesty. We told one customer we simply couldnt do the volume we were doing before. The customer was very upset with us, but our decision forced them to look at how they were doing business. They came back to us six months later, and the relationship is stronger now than it was before.
Roush noted that the company has reduced its work force by about 20 percent since 2009 to 800 people but has actually increased production during the same period. We look rigorously at how to load those facilities to maximize return.
With its new approach to value-added services, JW Aluminum hasnt been shy about raising prices or fees. In June 2011, the company increased the conversion fee for aluminum sheet and foil products by 1 cent to 5 cents per pound, depending on gauge. That spring, the company applied an energy surcharge of 1 cent per pound. Since value is part of our strategy, we feel that the customer will understand when prices go up, Roush said.
JW Aluminums senior management team acknowledged that volatility associated with the flat-rolled aluminum sector is likely to remain a factor in strategic planning, at least for the foreseeable future. McCarter cited the freight risk of early 2011, when fuel prices spiked and sent freight rates surging. Fuel charges must be passed along to the market, he said. Producers can no longer absorb the cost associated with commodity swings.
Commodity and economic variables that are beyond any companys control dictate that JW Aluminum look at strategic planning for the long term. In a recent speech, McCarter pledged to take control of the future by developing and putting in place strategies through 2015 to withstand volatility in the aluminum market.
A new Oracle software and database system that was launched across the company in 2011, coupled with its lean transformation efforts, have helped reduce inventories companywide by nearly 30 percent in little more than a year. Inventories had been a sore spot for the company for years, and McCarter is particularly proud that inventories have been cut in half since he arrived at JW Aluminum less than three years ago.
Mount Holly-based JW Aluminum, which describes itself as one of the best-kept secrets in the flat-rolled aluminum market, wants to be recognized as the leading aluminum rolled products company in the world, McCarter said, a tall order in the ultra-competitive world of flat-rolled aluminum, but one that McCarter and his management team think is doable.
JW Aluminum will continue to shift from a manufacturing-centric organization to a market-centric approach. And that doesnt necessarily mean the company will always sell aluminum products. Product lines in the future might include stainless, extrusion or copper. We may be selling some stainless if we feel we can do it profitably, McCarter said. If we can sell popcorn here and make money at it, well try it.
One thing that JW Aluminum will emphasize as part of its WIN strategy going forward is a global component. The company recently launched its Global 1 Source Solutions program, which looks to augment the companys domestic aluminum manufacturing capabilities with supply from international mills.
With the addition of Global 1 Source Solutions to our portfolio of services, we are truly a global supplier, not simply a domestic supplier, Roush said, explaining that JW Aluminum will collaborate with customers to identify product requirements and then fulfill those requirements through a combination of the companys four domestic mills and a network of offshore suppliers who have joined a global partnership with JW Aluminum. These established global partnerships have allowed us to expand our already extensive product line and meet all of our customers aluminum flat-rolled needs like never before. This diversification will expand our footprint in the transportation, consumer durables, packaging, and building and construction markets.
Roush stressed that the company will continue to provide support after a sale. We want our customers to feel secure that they can rely on JW Aluminum to deliver what they need, when they need it. We offer the peace of mind that our four mills and our offshore partners will come through for them.
For McCarter and the senior management team, the cultural change at JW Aluminum is part of a long-term process that might never be finished. Were a long way from being perfect, he said. You never can stop making it better. You never really finish your journey.
McCarter is an optimist about American industrys ability to compete in the 21st Century. Citing Clint Eastwoods pitch in the recent Super Bowl commercial for Chrysler Group LLC, he noted its half-time in America in the approach weve taken to the flat-rolled aluminum market. We do have a great story to tell.