Turnaround, International Case Study

“A day in the life of a company in crisis is like a month in a healthy company.” _{Harvey Kibel, Kibel  Green, Inc.}

Hagemeyer-Cosa Liebermann Group Hong Kong and Switzerland

The Schmidheiny group (Anova, AG) purchased a controlling interest in the $1.5 billion Cosa Liebermann Group (CLG), an industrial and consumer products marketing group with operations in seven European countries and twelve Asian countries.  CLG subsequently merged with Hagemeyer Asia/Pacific, the Far East activity of Hagemeyer, N.V., a very large Dutch-based marketing company. The resulting new entity, The Hagemeyer-Cosa Liebermann Group was owned 50/50 by Hagemeyer and Anova and had operations in fourteen Asia/Pacific countries. The Chairman and CEO came from Anova.

The Technology Division strategic business areas included:

• Mechanical Manufacturing Technology
• Textile Technology
• Basic Materials Technology
• Converting and Printing Technology
• Chemical and Food Processing Technology
• Electronic and Control Technology

The Consumer Goods Division strategic business areas included:

• Sports (sports shoes, winter equipment, outdoor wear)
• Home Products (appliances, electronics and house wares)
• Lifestyle (fashion, cosmetics, watches, leather accessories, writing instruments)
• Photographic (photography and imaging products and services)
• Food and Beverage (wines, spirits, tobacco confectionery)
• Scientific (medical, security)

Branded products included Bally, Karl Lagerfeld, Louis Feraud, Porsche Design, Cartier, Chanel, Puma, Ray-Ban, Parker, Mistral and Kneissl.

MIS Integration Advisory Services

Thornburg served as a principal advisor to the Schmidheiny group on the development of new management information systems for the newly acquired Cosa Liebermann Group. Prior to the implementation of the system, the local company in each country had its own accounting system and procedures at the operating level. Computers and systems were not networked across borders and operating systems, particularly in Japan where there extensive retail and wholesaling operations, were incompatible. As a result the primary means of inter-company communication was by fax and telephone. Results by division and product were laboriously consolidated and summarized in Hong Kong resulting in unacceptable time delays and errors. Inventory management and cash management was Balkanized and ineffective.

The MIS project involved the establishment of a comprehensive, multi-discipline approach to sales planning, budgeting, financial reporting, purchasing, logistics, cash management, accounting, taxes, retail sales, wholesaling and industrial customer sales. To assure ownership of the new systems, at critical points in the development process two dozen selected top and middle managers met in week-long brainstorming sessions with the advisory team in Phuket , Thailand where interruptions from the outside world were all but impossible. When completed, the system allowed management to review its operations by item, product line, division and country in a timely manner. Extensive training in each country preceded the roll-out of key elements of the system. Data centers were established in Hong Kong and Zurich and an internal email system was established to link all of the offices and operations together. Satellite communications were used where local telephone service was inadequate. Rather than build a customized MIS system from scratch to control retail, wholesale and financial reporting activities, packaged software vendors in Europe, the US and Asia were reviewed and visited by CL teams. The software integration team was moved from the headquarters in Hong Kong to Malaysia where there was a larger pool of skilled programmers. Ultimately several major software systems were selected and integrated to form the core of the new system, which performed as intended.

Hagemeyer-Cosa Liebermann ( Thailand ) Turnaround

Unfortunately at the time of the merger of Hagemeyer-Cosa Liebermann, Hagemeyer's Thai company had an antiquated computer system that was not integrated into the new CL MIS system. It soon became clear that the company was in trouble as the Thai economy worsened, the Baht weakened against the major currencies resulting in foreign exchange losses and unsold inventories mounted. Thornburg & Co. was hired to review the operations and prospects for each of the following activities:

• Beauty Products and Cosmetics (e.g. Dior, Givenchy products sold by company employees at retail counters within department stores)
• Home Products (e.g. Moulinex, Coleman products sold nationwide)
• Bakery Products (sold to large and small bakeries nationwide)
• Liquors and Wines (nationwide through local stores)
• White Goods (e.g. refrigerators, washing machines sold at major stores)
• Specialty Chemicals (sold to direct to industrial customers)

As a result of this review the Liquors, White Goods and Specialty Chemicals activities were discontinued and headquarters staff downsized accordingly. Thornburg traveled to Hong Kong and Bangkok on a monthly basis while the plan was being implemented. The country manager, MIS manager and a controller were replaced and product line management reorganized. Each SKU, customer and distribution point for in the remaining three product groups was analyzed and unprofitable activities or slow moving items eliminated. The MIS system was rapidly upgraded to interface with the HCL system described above. The warehouse operations were totally reorganized to eliminate theft, handling damage and improved repair cycles for returned goods. The reorganization of the company was substantially complete prior to the devaluation of the Baht, thus saving HCL from a disaster of significant proportions.