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Echlin Inc.
100 Double Beach Road
Branford 06405
(203-481-5751, http://www.echlin.com)
Sales (fiscal year ended
August 31, 1997): $3.569 billion
Net income before extraordinary items (fiscal year ended August 31, 1997): $117 million
Chairman, president and CEO:
Larry W. McCurdy
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Business New Haven
2/9/1998
By: BNH
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Larry McCurdy took a circuitous route to his job as president and CEO of auto parts manufacturer Echlin. After working for 26 years at Tenneco Inc., he served as Echlin president from 1982
to '85.
Leaving Echlin to become Moog Automotive's CEO, McCurdy stayed on at Cooper Industries when that company bought Moog in 1992. In March 1997, McCurdy returned to Echlin to replace Trevor Jones, who had temporarily served as chairman and interim president.
McCurdy rejoined Echlin during a period of substantial transition. In January 1997, Scott Greer, Echlin's then-president and COO, left the company “to pursue other business interests.” In the next month, Fred Mancheski, longtime Echlin chairman and CEO, retired to become chairman emeritus.
Arriving amid turmoil and flat earnings growth, McCurdy was able to start Echlin on a program of reforms and spin-offs to improve the company's focus - and its profit margins. Though fiscal 1997 sales (year ended August 31, 1997) improved 14.1 percent, operating income fell 9.7 percent and net income 17.4 percent. This followed 1996 declines of 3.5 percent and 7.9 percent.
The solution, as McCurdy saw it, was a top-to-bottom review of Echlin's component businesses, in conjunction with a switch to economic value added (EVA) as a means of determining which subsidiaries made enough money to cover the cost of the capital they consumed.
The result was a massive program of consolidations and sell-offs covered by a $163.4 million after-tax charge against earnings. Through divesting businesses with sub-par performance and improving manufacturing efficiency, Echlin hoped to grow its profits again.
Among the purchases Echlin made was General Automotive Specialty Co. (see Business Wire), as well as the North American aftermarket division of ITT Automotive, producing under the brand name AIMCO. This strengthened Echlin's product line in brake parts, and added to the aftermarket sales that account for two-thirds of Echlin's revenues.
As an international concern, Echlin did not restrict its purchases to North America and so also bought Brosol, a Brazilian fuel system manufacturer, and Nobel Plastiques, a European hydraulic concern.
Those acquisitions were paid for by an equally aggressive program to spin off Echlin's non-core businesses. Echlin sold its Western Automotive Distribution Warehouse-European Automotive Parts along with its Australian distribution business. In August the company sold its Preferred Plastic Sheet and in October spun off Ace Electric Co.
The results of these reforms have still not made their way to the bottom line. While sales for the quarter ended November 1997 were up slightly over the previous year, profits continued to lag, down to 52 cents a share from 61 cents last year. Investors in Echlin will have to wait patiently for the restructuring to pay off.
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