Going Back Up

Once he’d finished his assessment, Lowenberg and other Minnesota Elevator managers began installing a new business plan. With cash flow an urgent problem, the company reduced its work force from 205 to 180 employees. Lowenberg also suggested that Minnesota Elevator stop trying to compete with other major manufacturers in the high-volume, low-margin market. “That’s not what the company’s good at,” Lowenberg says. “They’re set up for projects that are complicated and require a high level of engineering and project management.”

Minnesota Elevator also fixed its bidding process. The company hired or promoted three product-line managers who oversee bidding teams that include members from every department. Everyone on the team looks at every project before the company issues a firm quote. The teams then report to the product line managers, who measure how many quotes each team does each week, at what margin, and the number of projects that result. Rather than undercutting itself, as the old bidding process often led it to do, the company was able to improve its margins by 10 to 15 percent.

In addition, Minnesota Elevator asked its remaining employees to look for places to cut costs. The research and development and application engineering departments saved, respectively, $401,565 and $318,000 in 2006 by finding ways to do jobs less expensively while still maintaining quality. The supply chain department saved $200,000 during the same period by looking for better purchasing deals, seeking lower prices and finding suppliers that offered shorter lead times, innovative products, and better packaging (which helps parts arrive in better shape, and makes them easier to store and access).

All these efforts helped the company win the 2007 Turnaround of the Year Award from the Minneapolis-based Upper Midwest chapter of the Turnaround Management Association. More importantly, Minnesota Elevator started turning a profit. Every month since May 2006 has been profitable, Lowenberg says. Though sales were down from $43 million in fiscal 2006 to $39 million in fiscal 2007 (ended in June), the company swung from a $1.4 million loss to a net income figure of $796,000.

The turnaround process also helped Romnes, who started the company in 1971, find someone to take over day-to-day operations. “I had been thinking about retiring for a while, and Rick seemed like the right man,” Romnes says. “We’d spent more than a year working together, and I felt very comfortable bringing him on board as president.”

For his part, Lowenberg says, “I’ll be with the company as long as I can add value.” So far, he’s been successful at that.