ANN ARBOR, MI —
Yesterday it was announced that Dana Corp. had completed the sale of the Dana Automotive Aftermarket Group (AAG) to Cypress Group, a New York-based buyout firm. The new company, renamed Affinia, will be lead by Terry McCormack, an aftermarket veteran of more than 30 years. McCormack spent three decades in positions of increasing responsibility at Dana, and was named president of Dana AAG in 2000.
Join us as McCormick describes his visions for the future of Affinia and reflects back on AAG’s time under the Dana organization.
We’ve been fortunate enough to talk to other members of your team since this whole process began. While we are up to date on the acquisition itself, let’s talk about the future for Affinia. What are your initial plans for Affinia and what are your long-term goals for the company?
Our initial plans are to make sure we remain focused in three areas as we begin implementation of our operational revitalization plans. The three key areas are our people, our customers and our results. We know from observation how easily a company can lose sight of the importance of its people, and Affinia won’t make that mistake. It takes intelligence, passion and pride to grow a successful company, and the only source for those things is our people; so we’ll listen and communicate more fervently than ever. And when we take good care of our people, they’ll take good care of another essential group of people…our customers. We understand and appreciate the absolute importance of serving our customers, not just better than anyone else, but in ways that nobody else can. Nurturing our people and our customers in this manner will produce outstanding results. Long-term, our sights are set on growth. During our operational revitalization, which will take one to two years, we’ll pursue organic growth through enhanced customer service, consistent product improvements and flawless delivery. We submitted the plans to Cypress during due diligence, they approved them and now that the money and keys have been exchanged, we are moving ahead quickly and precisely to implement these plans. As for non-organic growth, all I can say is Affinia will remain open to good, solid opportunities.
How does it feel to be at the top of a seemingly independent aftermarket business, after being with Dana Corp. for so long?
Dana is a fine company with a proud heritage in both the original equipment and aftermarket segments. As disappointed as we were at the path they chose, we understand it completely. It’s becoming increasingly difficult to serve two masters, and three-fourths of Dana’s business is on the OE side. But to say we are an “independent aftermarket business” is a bit of a misnomer as it refers to aftermarket. We actually have quite a substantial amount of OE business in both brake and filtration, and that is one of the organic growth areas I referred to earlier. In regard to “independent,” it feels great. We have the benefit of starting with a large, well-established base of business and highly respected brands, but with a thrill and exuberance that only comes with a start-up. In my 31 great years at Dana, I don’t think I ever saw such raw excitement as I’m seeing among our people at Affinia, whether they are one of the many bright young people we’ve hired to replace Dana services or one of our existing aftermarket team members. Our management team fought hard and smart to gain the type of independence that would be good for our people. Going forward, “independently” as you say, we’ll work even harder to justify the pride and passion that we all have for this company and this industry.
How will the organization differ from the way things were run under the Dana Corp. umbrella?
Based on constant monitoring over the past several months, we recently modified the fully matrixed organization we adopted in 2003. Part of that change involved reinstatement of our “Under Hood/Under Vehicle” structure. Keith Wilson, former vice president and general manager of Wix, now will have full responsibility for the Under Hood Group, which includes Beck/Arnley and Quinton Hazell in addition to Wix. John Washbish is vice president and general manager of our Under Vehicle Group, which includes all of brake and chassis. He also will retain his role as president of Customer Relationship Management (CRM). This revised approach will support the continuing evolution of our CRM initiative, and give us good strong leadership at the division level. It also streamlines our senior corporate staff, which has gone from 14 to eight. We now have a better balance between strategic and operational resources, and a better interface between the two. The short answer to your question is we are no longer constrained by any sort of corporate conventions other than our own. We’re agile, open minded, determined and in charge of our own destiny.
In announcing the organizational changes that resulted from the acquisition, you were quoted as saying “more changes to anneal and concenter” the organization would be announced soon. Are you ready to make those announcements?
Since I used those words I’ve been asked a few times why I didn’t speak more plainly. I wish I’d phrased it differently…perhaps “to indurate and focalize” would have been better. Seriously, the changes I was alluding to will become apparent over the next several months, but we’re not ready to make them public at this point.
Along those same lines, let’s talk about your focus on strengthening the organization. How do you plan to do this and how long do you feel it will take to form a cohesive team all working toward the same goal?
We began developing into a team four years ago, and we started with the best, including some of the best-known people in the aftermarket. That group, with a couple of exceptions in our brake and chassis business, remains in place today. The divestiture process, which took 362 days and nights, drew us even closer together. In fact, it transitioned us from a workgroup into a team…a cohesive team. As for goal alignment, we expect to have all 14,000 Affinia team members worldwide familiar with and united behind a common set of goals within weeks. This starts with Affinia’s corporate goals, which I have right here on a card, and cascades through my staff, their staffs and so on throughout the entire organization. The key is to keep the goals simple, assure consistent support at each level for the level above and make sure everyone has them in writing. We have a process in place today to do just that. From there, it’s communicate, communicate, communicate…which we will do religiously as I mentioned earlier.
What strengths do you feel Affinia will bring to the marketplace?
One thing comes to mind immediately is a real understanding of the aftermarket. Our people understand the changes the market is going through, and the adjustments necessary to manage them. We also bring a tremendous amount of category knowledge in brakes, chassis, filtration and foreign nameplate parts. Today, we’re good at doing a timely job of providing the right products for our customers. We’re making changes in our processes and organization that will take us from good to great in that area. These three things…a profound understanding of the market, comprehensive knowledge of our product categories and determination to be first in new product introduction…are excellent examples of what we bring to the marketplace. Of course, they owe their existence to our biggest contribution to the aftermarket…the pride, passion and performance of our people.
If I were a competitor to any of the Affinia brands, why should I be concerned about your new structure?
If you’re a competitor, why should I tell you? I will say this: With so much over capacity and off-shore activity, our marketplace presents a degree of brutal competitiveness not seen on earth since the caveman days. Anyone who is not concerned about their competitors is either a genius, or more likely a fool; but anyone who becomes more obsessed with their competition than with their customers is even more foolish. Am I concerned about my competitors? Sure I am. Should they be concerned about what we’re doing? Of course they should…because first and foremost our mission is to take care of customers like no one else can.
While Affinia’s brands are strong, other brands have made great strides not only in recognition, but in market penetration as well. What is the most compelling reason for your customers to remain loyal to your brands?
That’s a very interesting question, and I think the answer leads us off in a slightly different direction than you might think. You are right about Affinia’s brands being strong, and there’s no doubt that other brands are vying hard for mind share of their own. However, more concerning than the “battle of the brands” today is the battle of brands versus low-cost, “fit for use” product. It is inundating our market, primarily from China. I’m not whining about it. We’re in a global economy; either you can play in this league, or you get sent down. We’re here to do more than play, we’re here to compete, and we’re here to win. Now that I’ve told you who the other team is, let me tell you what’s in our line-up that’s not in theirs, generally speaking. It starts with an easy-to-sell brand and a “peace of mind” level of quality. From there it’s the little things, like hundreds of sales and support people, hard to find parts along with the popular stuff, pull-through promotional support, full catalog and reference material services, technical support, training, and a broad assortment of supply chain technology tools and capabilities to enrich our trading partnerships. As I said, it’s these little things we hope combine to present a compelling reason for customers to prefer our brands.
I’m a skeptical customer, and I believe the venture capital group will be looking to split up the Affinia organization and sell off its parts for a tidy profit as soon as possible. What can you tell me to convince me this won’t happen for many years to come, if ever?
In today’s business environment, that seems a somewhat naive question, but I’ll answer it seriously and honestly. As we’ve said all along, ownership of a company may change at any time, but the customers remain the same. They have the same challenges and concerns, the same needs and they maintain the same respected position as the drivers of our business. These are constants. If the decision were made to break up Affinia and sell the pieces, the only motivation for a buyer would be to end up with a viable business from a customer perspective. And you have to ask yourself, if the business is worth more in pieces, why didn’t Dana take that approach? Cypress has an automotive plan that includes OE and aftermarket. Everything they have said and done contravenes what you suggest. The bottom line is, brake, chassis and filtration are all growth categories and form the cornerstone of the type of organization that will be required to survive and flourish in tomorrow’s aftermarket.
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