About Steve

Steven Wybo has over 20 years of experience helping manufacturers through insolvency, bankruptcy, turnaround and crisis management. Steve is the Senior Managing Director running Riveron’s Automotive financial consulting business. He’s led 75+ turnarounds as Chief Restructuring Officer, interim CFO and other critical positions.

Top Takeaways

• The preconditions for turning around a business:
  • Product or service people want
  • Competent management team
  • Cashflow
• Practicing honesty and transparency is the only way to operate. “Generally speaking, stakeholders will work with you, at least in the short term.” Making commitments that you can’t honor is a recipe for getting shut off by vendors. Not getting the material you need can cause a “death spiral.”
• Successful financial turnarounds use a 13-week cash flow forecast to run the business, not a P&L. Without cash, a business becomes insolvent.
• Top ways to increase cashflow include negotiations with vendors and lenders as well as cutting costs and decreasing working capital tied up in inventory.
• At a high-level, the priorities for a turnaround are:
  • Day 1: Cashflow management
  • Day 2: Trim what costs you can
  • Day 3 – Onward: Fix the operations of the business
• When fixing an insolvency issue, it gets a lot more expensive and a lot more dire the longer you wait. It’s like a heart attack patient, the right team can “lower your cholesterol before you end up on the operating table.”

“You really need to address the core problem, and oftentimes that’s just inefficient operations.”

Steve Wybo

When a business isn’t working and cash is depleting, dramatic action needs to be taken. Folks in the industry call this restructuring, which is a vanilla way to say, “there will be a lot of painful changes, very quickly.” Restructuring is one of the most difficult times in the life of a business. Companies suffering a liquidity crisis can burn through all their cash trying to solve their problem and, at the end of the day, be left facing bankruptcy. 

When a business is in survival mode the company must make difficult decisions about operations, workforce, debt, and potential asset liquidation. The COVID crisis combined with the near-total withdrawal of governmental support is slowly pushing a greater number of companies into restructuring territory. Most business leaders haven’t done this before. Restructuring requires a different skill set and mindset than managing in good times. The margin of error is too narrow, and the consequences too grave, that most companies leverage specialized restructuring consultants to navigate the process and help the company emerge as a more efficient entity. 

Restructuring and COVID 

The climate created by COVID and the governmental responses to COVID dramatically changed the positions of many companies from one day to the next. In the beginning, governments created financial buffers like the Paycheck Protection Plan to help companies navigate the crisis. However, these programs have waned entirely, and businesses are left to fend for themselves. This, combined with lingering supply chain issues, has left many companies in dire financial straits. More companies every day are looking for ways to reduce costs and create a more efficient operational process. Restructuring, especially operational restructuring, is often an option on the table. While this may cause short-term pain, restructuring often leads to a more efficient and resilient business structure. 

Restructuring Consultants With Operational Expertise 

The first thing to consider when hiring a restructuring consultant is to find one that has operational expertise. The ripples of the COVID crisis are just starting to subside, however many companies have been left feeling rattled and without proper orientation. Even though the environment is improving, automotive, aviation, and medical device manufacturers can still expect substantial supply chain difficulties into the future. Choosing a restructuring consultant specializing in a company’s area of operations will help to minimize supply chain disruptions with inventory management and JIS/JIT solutions. 

Honesty 

Restructuring is always difficult and high-stress; you need a partner with integrity, capability and confidence to help you through. Any deep-dive analysis of a company requiring restructuring will often unearth unpleasant truths that may require difficult conversations and must be handled with grace, tact, and honesty. It’s the best (and only) way to deal with the reality on the ground. Existential problems with leadership may exist compounded with inefficiencies that require drastic changes to operational standards. These changes can be painful, but an honest restructuring consultant will help guide the changes and speak the truth when and where necessary. 

Specialized Consultants with Specialized Experience 

Specialized consultants go above and beyond traditional consulting firms by hiring former middle and upper managers from suppliers and OEMs that have real, hands-on experience running plants. This depth and breadth of experience is crucial for dealing with a restructuring scenario.  

These consultants understand the problems that a company is experiencing from day one and bring a solid initial understanding of how to fix them. Specialized consultants will also have a complete toolbox and methodology to understand and diagnose the range of problems that a company has. It is common for one problem to manifest itself with an apparent superficial cause. However, specialized consultants can help businesses understand the root causes of these problems and develop creative solutions. 

Agility 

The problems that manufacturers face are numerous and much of the pre-COVID playbook is out of date or totally obsolete. In order to solve many of the problems that companies are facing today, restructuring consultants must move quickly and decisively to solve problems. No two companies and circumstances are exactly the same, and therefore every solution must be tailored to the company in question. Specialized consultants have the ability to get up to speed quickly, implement a processes that identifies actions, and are able to execute those actions quickly. No matter the company in question, creative and agile consultants will make their presence known the first day and felt within the first week. 

Communication 

This point may appear obvious, however, one essential characteristic that a restructuring consultant can possess is the ability to communicate. Restructuring is often fraught with competing interests, difficult decisions, delays, negotiations, and occasionally litigation. Clear communication does not make any of these difficulties disappear, however it can minimize the discomfort caused by these difficulties. Specialized consultants have the advantage of knowing what information is most crucial for the company to know as well as how to communicate and navigate the decision-making process.  

Interpersonal Skills 

Finally, an excellent restructuring consultant should have impeccable interpersonal skills. Difficult decisions will undoubtedly need to be made, but faithful advocating for the best solution and resolution to different problems can make the process minimally painful. Expert restructuring consultants will know how to navigate decisions affecting different roles and how best to communicate those decisions. Restructuring often requires cuts to human resources as well as changes in responsibilities, and hierarchy. Interpersonal skills can be the proverbial spoonful of sugar that helps the medicine go down. 

Conclusion 

Companies hope to never find themselves in a restructuring position. However the best way to manage the difficult situation is with a partner that can understand the situation quickly, identify actions, and start executing to solve problems. Hiring the right restructuring consultant, like Seraph, can help make the process as painless as possible. Seraph is a team of specialized operational consultants who can help your company navigate the entire process of restructuring. Our advisors are former management at many suppliers and OEMs and know the restructuring process inside and out. Contact us today to schedule a discovery call, or see our case studies for more information.

INDUSTRY: Automotive Manufacturing

SERVICES: Relocation and Consolidation

Situation.

The client was facing severe financial problems but was planning to restructure their plants. However, they were not prepared for a successful transition and were unable to achieve it without harming the customer base.

Actions.

• Implemented structured planning approach and accountability.
• Created PFEP (Plan for Every Part) including a tool transfer process (both internally within in the company and externally to third parties).
• Increased OEE (Overall Equipment Effectiveness) to ensure available capacity of remaining sites.
• Utilized various Seraph manufacturing tools for analysis and guide for improvement: bank build models, customer requirements runout models, capacity analysis tools, and OEE improvement step-up models.

Results.

• Successfully increased production and transferred process for 5 facilities.
• Reduced the manufacturing footprint by relocating 2 facilities.
• 8 OEM and 31 low-volume customers moved.
• 146 tools moved and 58 tools transferred.
• Improved OEE by ~20% pts.
• Zero missed shipments