DAYTON, Ohio - On a Sunday afternoon in late 1995, General Motors' Lerick Chissus found himself inside a small construction trailer near Dayton, face-to-face with the owners of Tube Products Corp.
Outside, the construction crew's toilets had overflowed. Inside, the owners - with varying degrees of fear, shame and anger -were telling him that they could not finish their new factory on time.
The resulting shortage of exhaust pipes would soon force General Motors to stop building one of its most profitable vehicles, the full-sized C/K pickup.
To Chissus, GM's director of metal purchasing, this much seemed clear: Tube Products could not fix itself. Its factories were already running 24 hours a day. Its workforce was demoralized, its managers overburdened.
So, without consulting GM's lawyers, Chissus decided the carmaker would take over Tube Products' plant in Franklin, Ohio. That same day, he called in a special, 50-person GM team. Within a week, he had pressured Tube Products to replace its president and persuaded the owners to sell the company.
The showdown had a happy ending. The plant was completed, GM got its parts and Tube Products is prospering under new owners.
Weaknesses at GM
In an era when one missed delivery can halt an assembly line, GM and other automakers cannot afford a hands-off approach to troubled suppliers. After the rescue was complete, Chissus was forced to re-examine some near-fatal shortcomings in the way GM evaluates suppliers.
Tube Products had won honors in 1992 as a GM Supplier of the Year - and then choked on its own growth. GM had congratulated the company for on-time deliveries - and then had to use helicopters to rush parts to its assembly plants.
Worst of all, Tube Products operated a factory so dangerous that injury-plagued workers called it 'the Finger Factory.'
The danger signs were there, if anyone had been looking. Tube Products was enduring growing pains. After the 1992 award, General Motors gave the supplier a sharp increase in business.
That was intoxicating for Tube Products, which had been a small, family-owned operation until 1988, when seven investors led by an insider - company President Jim Bryson - bought it.
During 1992-95, sales had risen from $23 million to $132 million a year. But Tube Products was overloaded. To meet demand for parts, its factories in Louisville, Kentucky, and Troy, Ohio, depended on overtime. The Troy plant operated around the clock. Employee turnover was sky-high, and there was an epidemic of injuries.
The first danger sign came in the summer of 1995. Troy had fallen so far behind that GM was using helicopters to fly exhaust pipes from the plant to its assembly plants in Hamtramck, Michigan, and Lordstown, Ohio.
Tube Products had to pay the bill, which peaked at $500,000 in June. GM stationed a dozen managers in the Troy plant to oversee quality control and speed up deliveries.
But Chissus and GM's other purchasers overlooked this and the second danger sign: It became clear Tube Products could not find the right replacement for its manufacturing expert who left in 1994.
A leadership vacuum had formed at the top of the company, but GM did not know it.
The third danger sign was impossible to ignore.
To meet GM's rising demand for parts, Tube Products had decided to build a new plant in Franklin. Bad weather delayed construction, but Bryson remained confident.
He told the absentee owners and GM that the plant would be finished in time.
Although construction was far behind schedule, Bryson was forced to spend time troubleshooting production bottlenecks at the Troy plant.
'Bryson had to step into the vacuum,' said Everett Telljohann, Tube Products' former chief financial officer. 'He was the only production guy left. He got absorbed with the problems in Troy.'
In September 1995, Chissus learned that construction was three weeks behind schedule. In the first week of October, he inspected the site.
Chissus was shocked to discover the new plant was an unfinished shell, with no plumbing or sprinkler system. Only 20 percent of the factory's tooling had been installed, and even that machinery was producing junk.
'It took only a short walk around to see the trouble they were in,' Chissus said. 'It was obvious that the plant manager was overwhelmed. He had been working so many days he could barely stand up.'
Chissus demanded a Sunday meeting with Bryson and Tube Products' owners. 'I wanted them to meet on-site, so they could see what was going on,' he said.
They met in the construction crew's temporary trailer, right next to a portable toilet that had overflowed onto the ground by the loading dock.
Bryson, a hands-on manager, did not delegate authority easily, Chissus said. 'He was very proud, and he wanted to do it himself.'
Chissus demanded the owners give their approval to GM moving in to oversee completion of the Franklin plant. He gave them a few minutes to consider their decision.
'When we retired to the other building,' said one of the owners, 'Bryson was saying that GM was trespassing and had no right to do that. He was saying that we ought to call the police and lock the doors.'
Chissus did not wait for the owners' response. During the recess, he started making calls on his mobile phone to assemble a special GM team. 'I didn't give the owners much of a choice,' he said. 'I just took over.'
There was one problem: Chissus had no legal authority to do so. Tube Products had not yet signed a right-of-access agreement - a document that would have granted the automaker the authority to stage a takeover.
On the other hand, the owners understood that GM accounted for 95 percent of their sales. Without its largest customer, the company was worthless.
The rescue team
Shortly after the meeting, Telljohann and the other owners convinced Bryson that he should step down. They turned to two management consultants at Jay Alix & Associates to take charge. Tom Cross became the owners' spokesman, and Joe Wenzler became Tube Products' de facto chief operating officer.
Cross told Chissus that Tube Products did not have the resources to speed up construction, so the company would accept GM's help.
Although Jay Alix consultants proved to be useful go-betweens at a crucial moment, Tube Products' owners were unhappy. They believed GM was partly to blame. The carmaker had made last-minute engineering changes to the exhaust system, Telljohann said. That forced Tube Products to make more prototypes and order new tooling.
The rescue team
Chissus did not waste time. He asked to borrow experienced foremen and skilled tradesmen from two GM truck plants.
Then Chissus demoted Tube Products' plant manager, replacing him with a retired executive from GM's Shreveport, Louisiana, pickup plant.
He also raised hourly wages on Franklin's undermanned assembly line by $1 to $7 to fill 100 job vacancies.
As the special team got organized, as many as 50 GM managers were on the scene. Confusion reigned, because they shared office space with two consulting teams, three sets of auditors and prospective buyers' representatives.
But the plant was completed and the flow of parts assured. As the crisis subsided, Chissus reduced his staff.
Belatedly, Tube Products signed a right-of-access agreement in November, giving GM legal authority to run the supplier's plants if production broke down.
GM had no desire to run the company indefinitely, and demanded that Tube Products find a new management team. GM denies telling the owners to sell, but they say they felt under strong pressure to do so.
Telljohann says a middleman recommended by GM found a buyer: the investment firm Questor & Associates. Coincidentally, Questor's boss is Jay Alix, whose consulting firm had provided advice to Tube Products. Questor bought the company on 23 February 1996.