Crisis turnaround: material price compensation, inflation recovery and restructuring to ensure sustainable continued existence
DDIM.project // Interim Management Excellence 2024
Every year, the umbrella organization Deutsches Interim Management e.V. (DDIM) at the annual congress for mandates that have created a high benefit for the client. In 2024 I received the award DDIM.projekt // Interim Management Excellence in the category Reorganization / Restructuring.
About the company:
CRRC New Material Technologies GmbH is the holding company of the BOGE Rubber & Plastics Group based in Damme, Germany. The Group is a leading manufacturer in the field of vibration control technology and lightweight components for the automotive industry with German plants in Damme and Simmern as well as 8 international production sites (Slovakia, France, USA, Mexico, Brazil & China).
BOGE is 68.08% owned by Zhuzhou Times New Material Technology Co, Ltd (TMT) and 31.92% by CRRC Zhuzhou Institute Co, Ltd China. BOGE was founded in 1931 and was fully integrated into ZF Friedrichshafen AG in 2003 following the takeover of parts of the business by ZF (1984) and Mannesmann (1991). It was sold to TMT in 2014.
Framework data:
Client: CRRC New Material Technologies GmbH
Industry: Automotive, automotive supplier Tier 1 // GmbH, SME
Turnover: € 792 million
Employees: 3,763
Initial situation in the company:
- Continuous losses since 2019; operating result 2022: € – 67.8 million
- Global causes: Covid-19 pandemic, Ukraine war with effects on global supply chains and inflation
- This led to significant price increases for raw materials, energy and labor costs, which were not or only insufficiently compensated for by customers
- In addition: many loss-making products with too low a sales price and contribution margin
- Restructuring and renegotiation of prices were necessary to ensure the long-term survival of the holding company and European locations
Challenges:
- Quick start 0 to 100 required due to the explosive nature of the situation and the need to enter into negotiations with 2 main customers within the first 6 weeks
- Identification of loss-making products and plausibility check of price adjustments with a difficult, inconsistent database
- High resistance from customers
Core tasks and objectives of the mandate:
- Management of the restructuring project for the European locations and coordination of the cooperation between the internal departments involved, Deloitte and the clients; later also for the location in Mexico
- Advising the management on the negotiation strategy and determining the necessary customer contributions for a successful restructuring
- Negotiations with OEMs / Tier 1 suppliers to compensate for inflation-related cost increases and to enforce profitable prices for loss-making products that threatened the existence of the company
Measures:
- Quick, initial analysis of the situation in order to obtain an overview of the complex problem situation and primary focal points at short notice
- Close exchange with management, sales, controlling and Deloitte in particular
- Development, detection and verification of claims for loss-making products so that they stand up to validation by clients or Deloitte
- Initial focus on two main customers, later successively for all problematic customers and products
- Advising the management on the negotiation strategy
- Support and participation in negotiations with OEMs and Tier 1 suppliers
- If necessary, assuming the role of a “bad cop” who addresses critical issues
- Introduction of monthly reviews with the key account managers to track the implementation of receivables and payments by customers.
- Regular status reporting for the management, advisory board and GBR
- As an accompanying measure, advising the management on organizational issues and improving sales processes
Results for the company:
- The sustainable continued existence of the company was ensured
- Securing the necessary customer contributions for the continuation concept
- Organization made more resilient through recommendations and active co-design
- Sustainable effects ensured through exemplary documentation of know-how transfer
Customer reference:
“Robert Schirra performed outstandingly for our company as interim manager in this project over a period of 19 months.
He made very valuable contributions that were essential for the sustainable continued existence of our company, contributed significantly to securing the necessary customer contributions for the going concern concept and persistently supported the negotiations of these claims.
For me, he was always a reliable advisor whose statements and data I could always rely on 100%. Even under difficult conditions, he always delivered reliable results.
With his extensive experience, his comprehensive know-how and his prudent and exemplary actions, he helped our organization to become more resilient.”
Philipp Frings
CEO // CRRC New Material Technologies GmbH
Project presentation:
You can download the slideshow for this project here.
