Chapter 12

Early the next week, Cliff had a rare staff meeting to review the company’s condition subsequent to the Magna cancellation. He was surprised to find that things were as good as they were. The sale of stores had progressed far faster than he had expected. They had concluded the sale of the western stores and a surprising number of buyers — three — were interested in all or parts of their northeastern properties.

The search for new business had gone remarkably well. They had made up almost half the lost volume. But Cliff realized their success was highly dependent on the success of the Kaga work. With the hoped-for Kaga volume added to the other new business, they would have made up all of the lost Magna volume. Everyone had their fingers crossed on that one.

He turned to Jeff Stover. “How do things look to you, Jeff?”

“Very good!” was the reply. “We seem to be cutting raw material waste to the bone. Of course, we’re saving big money on personnel due to the staff reduction in production. We hope to cut sales allowances, too. Then we’ve done a pretty good job on below-the-line costs, as well. We’ve shed some fairly high-priced executive compensation. Finally, Sandy’s cash management program has succeeded far beyond anything I would have believed possible. Between the sale of property and the cash freed up there, we may even be cash ahead.

“Cliff, the key to this whole thing is the effect it’s having on our cost position. When we looked at the business in the planning session we were cost disadvantaged against Ajax and had inferior quality. I think we may now be the low-cost producer. I’m sure we’re lower-cost than Ajax, at any rate. Now the question is product quality.”

“Yeah,” Cliff said, “Product quality. Bill, what about it? How are we doing?”

“Cliff, we’re doing better than I could possibly have hoped. My people have their fingers crossed. We think the statistical system for quality assurance is working, but we can’t really tell until the customers use the stuff. But we couldn’t have a better attitude on the floor than we do now. What we can’t be sure about is whether we can maintain it. There’s still a sense of euphoria from the meeting Max ran. The people still seem all charged up.

“What we’re hoping is that as the euphoria wears off — and it has to — it will be replaced by a sense of accomplishment as they see what they really can do on their own, without a battalion of inspectors looking over their shoulders. If a sense of accomplishment comes, that can be maintained. Let’s hope!”

Bill continued, “Cliff, I have a question. You’re the one guy around here who doesn’t seem to be surprised at our accomplishments. We always worked on a basis of redoubling our inspection efforts and clearly that wasn’t the way to go: We had the wonderful combination of sky-high costs and lousy delivered quality. Why did you think this approach would work?”

“First, Bill — your choice of words is apt: ‘You think’. I would have used the word ‘hope’ myself. However, there are two parts to the answer: First it works elsewhere, and in places requiring less skill than we require. Second, but related to it, is the idea people want to do a good job. We spend a lot of our time working. We do a hell of a lot better if we do something we like, something that gives us satisfaction. I’m relying on these people to derive personal satisfaction from a job well done.

“You can see that having a bunch of people looking over your shoulder can be counterproductive. You feel that you aren’t trusted. And you know what? You aren’t! It’s easy for a person to get the feeling that it doesn’t matter whether his work is good or bad. Then it gets bad because he doesn’t care anymore. Let’s keep our fingers crossed and hope the experiment works.”

Then he turned to Sandy and asked, “Do you want to summarize? How does the position of the company look to you?”

“I think it looks about as good as it possibly could under the circumstances. In fact, based on what Jeff says, I’m going to pay down the $25 million we borrowed from the bank. Strangely enough, Charley Adams will love us. There’s nothing quite like having a customer paying interest on a loan when the money never even left the bank. From the sound of it, we lost revenue but reduced our expenses even more. Is that right, Jeff? Do you think profits may be ahead of where they were?”

Jeff nodded and smiled. “That’s exactly the way I see it, Sandy. I didn’t really say it very clearly because I know what a shock the loss of the Magna business was. And I also know how tenuous our position is with Kaga. But the fact is, right now, I believe our profits are up. If we lose out on the Kaga order, though, things could change for the worse in a hell of a hurry.

“Also important is how well we do with our stores in Southern Region. We’re spending a lot of money on warehousing, new inventory and store upgrading. Basically, that’s marketing spending. As Cliff stressed in the meeting, the reason Market Penetration as a strategy is considered high risk is the activities have little or no salvage value. If we can’t build volume through the stores as a result of improving their physical appearance, the money is essentially down the drain.”

“Good point, Jeff,” Cliff agreed. “Steve, with your permission and Jane’s, I would like to visit Kaga Motors. What’s the general manager’s name? Saito?”

“That’s right,” Jane responded. “I’m sure he would be very pleased to see you. I’ll set it up. When would you like to go?”

“When is the first trial order scheduled to be shipped?”

“Tomorrow night to arrive at ten o’clock Thursday morning. You’re not thinking... ?”

“I sure am thinking,” Cliff smiled. “What do you think about the idea of being at their plant to welcome the first shipment of Murphy Manufacturing’s parts? Would Mr. Saito allow it?”

“I’m almost certain he would,” Jane replied. “In fact, I think he would consider it an honor. You know how so many Japanese in the States feel that they aren’t really welcome? I think he would be very pleased. Can I call him now?”

“Please do! Let’s see if we can make this work.”

Minutes later Jane returned to the room grinning from ear to ear. “Mr. Saito asked me to say that he would be most honored if the president of a major United States auto parts supplier condescended to visit his humble facility. And Cliff, that’s more or less a direct quote. He was so excited, he referred to welcoming Fitzpatrick-san to his plant. Boss, you started me thinking. Would it be overkill if we tried to get a banner made or something. You know, ‘First Shipment of Murphy Manufacturing Company Parts to Kaga Motors USA’. Something like that?”

Bill Stevens jumped on the idea. “I think it’s great. And I have an idea I want to bounce off Max Kaufman if you approve the banner idea.” Cliff grinned at his colleagues and was delighted at their enthusiasm. Plans went forward, although Bill never told him what he wanted to see Max about.

It was about six-thirty in the evening when Cliff and Sandy walked through the plant on their way to his car. Sandy had decided that everyone knew where they were sleeping and no one seemed to care, so her contribution to the economy drive was her gas money. They both felt good about the way the whole facility was starting to look. Not only were the production machines sparkling after their overhaul, but getting rid of dead inventory had freed up a lot of space. They had noticed that a lot more attention was being spent on housekeeping to make the place look like the precision manufacturing facility it was.

Then Cliff was surprised to see working lights still on in the area of one of the production machines. They walked over and found Bill Stevens with a machine operator.

Bill was looking at a bright set of rings he was holding carefully in his hand. “Cliff, I don’t think you’ve ever met Jim Wozlowski. He’s one of our machinists producing rings. He talked to his supervisor, and I’m really glad he did. Jim has been working on the Kaga order. He has the idea that they could get better engine performance if they used a different metallurgical formulation for the ring metal. This is another benefit of your talk, Sandy. Everyone took it to heart, and the communication both ways has never been better.

“At any rate, Jim has been working on his own time to machine a set of rings to Kaga specs, but using the different metal. Our tech people agree with Jim, by the way. Of course, we don’t know nearly enough about the internal arrangement of their pistons, operating temperatures, pressures and so forth. We produce to a specification, but we seldom know how the specification was derived. But what do you think?”