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New Henniges CEO studies firm, market

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AUBURN HILLS, Mich.—The past several months have been a learning experience and an extended road trip for Douglas DelGrosso, Henniges Automotive Holdings Inc. CEO.

DelGrosso took his post in August after 30 years in the auto industry. He said since then he has been learning about the rubber industry, and its peculiarities from other fields in the automotive sector.

The executive came to sealing and anti-vibration products maker Henniges from TRW, where he was vice president and general manager of global braking and suspension. After visiting all of Henniges' plants and studying the business, he said he understands the industry's past, what the company needs and intends to create a global network to continue its growth.

The road ahead

“This isn't a turnaround company,” DelGrosso said. “I haven't suggested we change a lot (at the company).”

His ambition is to expand and connect the firm's various operations, and he has encouraged sharing among locations so individual sites don't try to reinvent the wheel.

“Now we have North America designing for China,” he said. “Every plant should understand and realize how we should be organized and operate. We operate global program management teams, global engineering teams, global sales teams, so some of these key connecting points are already global.”

Connecting all the facilities takes time, and he didn't expect it to be a perfectly smooth road.

“We are learning lessons and communicating those lessons across the regions,” he said. “Problems are OK.”

For DelGrosso, problems aren't acceptable when people fail to communicate and they are repeated at other facilities. To help thwart that, the company will set up teams that go from region to region to help launch new processes

The executive said his job as CEO is to help create an environment where having access to these global facilities is seen as an added value, he said. “Our competition doesn't have global footprints, global operations,” he said.

Henniges has expanded that footprint, adding in recent times two facilities in China, one in Mexico and another in the Czech Republic. “We're in a pretty active phase,” DelGrosso said.

The firm operates plants in North America, Europe and Asia. Being globally connected gives Henniges a competitive advantage, and also helps even things out when one market is on the decline—something its rivals lack, DelGrosso said.

“Many of them have a tremendous amount of exposure in the European market,” he said. “The European market is not growing at a 5- percent compounded annual growth rate over the next five years.”

DelGrosso believes the European market hasn't hit rock bottom yet, and still could.

“In 2009-10 they did a lot of things to subsidize the market that the U.S. didn't do,” he said. Instead the U.S. let the market bottom out and let natural demand build it back up.

The European automotive market represents a small amount of business for Henniges, the CEO said. China is the biggest consumer today of Henniges products, although DelGrosso thinks the North American market has the potential to exceed it.

Most of Henniges' products are consumed in the region in which they are manufactured. DelGrosso said a lot of those goods don't ship well.

“We're a small company, we can't do everything larger companies can do,” he said. For Henniges it's more about understanding its customers than being able to compete with big corporations—although DelGrosso sees company size as no barrier to success.

Being able to understand a company's constraints and work- ing with them—not against them—is key, he said.

“We're not in a market where we're developing proprietary technology that we are going to sell,” he said.

“We've got a captive audience, we've got a captive custom-er base. What they do will dictate what we do,” according to the executive.

Experience

Originally from Detroit, DelGrosso began his career in 1984 at Lear Corp as a design engineer.

“It was a very small company that was growing into a fairly large one,” he said. That provided him with opportunities for advancement, and he spent 14 years in operations, three years running the European business.

Coming to Henniges was his opportunity to advance to the next level, he said.

“It was an opportunity to become a CEO,” he said of one of the reasons he joined Henniges.

He met with LittleJohn & Co., the private equity firm that owns the company, and discussed its vision for Henniges.

“(It) felt like we were taking about the same objectives,” he said of the conversations between LittleJohn officials and himself.

“We're trying to grow and do it in a managed way that assesses and manages the risk,” he said. “If we do that we think LittleJohn will be happy, the employees will be happy and any other investors we have will be satisfied.”

A sustainable model

Growing in regions that are on the rise has resulted in both LittleJohn and Henniges believing the company is being sustainable and able to offer a return on the investment.

Reporting to a private equity firm is nothing new for DelGrosso, since his previous employer, TRW, was owned by a private equity firm.

“I can draw very few differences between what TRW was trying to accomplish, what Lear was trying to accomplish and what we are trying to accomplish here,” he said.

He accepted the lead position and has dedicated his time to learning and understanding the business and sealing industry.

“I've been to every single facility we have,” he said. “I spent the first eight weeks asking questions. I essentially didn't have an opinion. I just wanted to understand what is it you're doing and why are you doing it.”

As someone who isn't exactly fond of sitting in an office all the time, this was his chance to get to know the products and the people making them.

“I wanted to understand what they do well,” he said.

“A lot of people think it's a fairly simple product, but it's not that simple, and to do it well and cost-effectively requires a lot of technical capability,” according to DelGrosso.

Some of those things include the firm's global technology department, its relationships with customers and its manufacturing, he said.

“As I have been out traveling (at the different facilities) I have tried to stop in and understand what our customers have been trying to accomplish,” the CEO said.

Customer expectations

Understanding not only the expectations of the customers but also the relationship Henniges has with them is beneficial.

“The expectations of our customers in 2009 were very different than they are today,” he said. “What they are looking for is pretty basic. They want low costs from a value standpoint, solid technology and they want their product delivered with a high quality.”

Serving as the pillars of what Henniges customers want, he said the customers have understood that there is a cost associated with these products.

“I think it has driven a better discussion about cost structure,” DelGrosso said of the automotive crisis.

“In theory if you have the right cost structure in place and productivity in your own business and you don't have fundamental competitive issues, then you can have an intelligent conversation with the customer about fair price for your product.”

By offering a fair price the business remains profitable, which as he said, not only keeps Henniges in business but allows the firm to provide the best quality products it can.

“I think our customers are appreciating those discussions a lot more than they have done in the past,” the CEO said.