Meet the New Quanex CEOSeptember 9th, 2013 | Category: Featured Content
The designation of William (Bill) C. Griffiths as the new president and CEO of Quanex in early July may have seemed like a sudden change. Indeed, it came on the heels of the unexpected resignation of David Petratis, former CEO, who left to accept a position with Allegion, and Griffiths tells DWM magazine that the Quanex board was shocked. But that doesn’t mean they weren’t prepared. In fact, the board, which includes Griffiths, already had a succession plan in place in the event of an emergency, and the board promptly put the plan in action following Petratis’ leave.
(DWM spoke to Griffiths just two weeks into his new role. Part of that interview appeared in the September issue of DWM magazine, but check out the full interview here along with a few updates. Also stay tuned to dwmmag.com this week as DWM will be catching up with Griffiths again on the trade show floor.)
Griffiths, 61, has served on the board since 2009, and most recently served as the managing director and member of the board of directors of Sealine International Ltd., a privately held manufacturer of motor yachts based in the United Kingdom, until June 2013. Prior to joining Sealine, he served as chairperson of the board, president and CEO of Champion Enterprises Inc., a producer of modular and manufactured housing, and president – Fluid Systems Division of SPX Corp., a global multi-industry company.
DWM sat down with Griffiths to find out what change to expect, what his immediate focus will be and challenges facing the Houston-based company.
DWM: Why do you feel you are the right executive to be the new CEO?
Griffiths: Well I have more than 30 years’ experience—much of it international. I have worked all over the world and clearly part of their [Quanex] strategy is to expand internationally and expand globally. I also have had direct involvement in building products in the modular housing business—that gives me some relevant experience. I have been on the board for a four-year period and that gives me a head start on any potential candidate. I have knowledge of the strategy here and, in fact, I have been very involved in planning that strategy. I know all the senior and middle managers and know all about the business, etc. As president I am now immersing myself in the company—for the first 100 days that’s the plan.
DWM: Is this an interim position or a long-term change?
Griffiths: It’s long-term. On June 4, even before this [Petratis resigned] we had a succession plan in place: we always have a plan for an emergency situation. We had decided that we would pick one of three directors, myself included, and decided we would tap one of them. We plan for anything, a plane going down, etc., but we never make a final determination until that happens. As it turned out, David resigned and this was equally as sudden and, quite frankly, surprising as any of the situations for which we had planned.
So we had to plan for his successor. In addition to being qualified, I was prepared to move to Houston [from Detroit] and take on the job permanently. The other two candidates were very well entrenched in their homes and they would have looked at it as a temporary position.
DWM: Did the board have a lot of notice that this change was coming?
Griffiths: We had no notice and it was a complete shock to the management team. It all happened very rapidly. He resigned right before the July 4 holiday and the board worked through that weekend and by that Sunday evening I was in Houston. David and I agreed that since I didn’t need a long handover we just needed a day to get up to speed.
To be clear this was a case of a terrific opportunity for him personally and very difficult for him to say no. It fell in his lap.
DWM: In a company announcement you said you would continue to execute David’s strategy and that you had worked closely with him on it. Can you expand on that and your plans going forward?
Griffiths: The board was very much involved with the acquisition and growth strategy in general. David did an excellent job of putting the Engineered Products Group together and that is complete. The next part was to utilize the cross selling capabilities to grow organically. Sometimes we have key customers that buy one component in large quantity but don’t buy any of the others. I would like to accelerate that strategy to take advantage of these cross selling opportunities.
DWM: David told me Quanex was looking for future acquisition opportunities. Will you be continuing upon that acquisition focus?
Griffiths: Definitely. There are opportunities out there (similar to Edgetech) where there are businesses that are the same as ours but with different footprints, so adjacent acquisitions could make sense. That won’t change.
Our acquisition of Edgetch has been very successful and our early read on our recent acquisition of Aluminite is that will be as equally successful.
DWM: Is there any part of the core strategy that will change?
Griffiths: I don’t think so. The reason I say that is because the board was very active in strategy development, along with the management team. We adjust every year however as circumstances may change.
DWM: Tell me about the financial health of the company. I know Quanex had some layoffs across all segments recently. Why was that necessary?
Griffiths: The issue for us is that we are in the middle of a massive project to put in a company-wide Enterprise Resource Planning (ERP) system.
(Editor’s note: Following this interview, in early September, Quanex published its third quarter results and announced that it has ended its ERP project: In August 2013, following a management recommendation, the company’s board of directors voted to cease the implementation of the ERP project. The proposal was made based on management’s belief that investments made in initiatives that will drive greater revenue growth and profitability will be more impactful to increasing shareholder value than continuing to invest in the ERP system,” said a company announcement.)
The expenses on that are running higher than we had anticipated. That in and of itself wasn’t the reason for cost reductions. We also have our Nichols Aluminum business that is suffering from depressed prices and that situation is impacting financial results. David put a cost reduction program in place and that is past us now. I don’t expect another wave [of layoffs] absent a material change in the environment.
DWM: How are you facing those challenges of supply/pricing issues related to aluminum which is a core part of your business?
Griffiths: It is fair to say that Dave had this issue firmly in his sights and took some actions. What I am doing now is my own review of the cost structure of the business and my own detailed review of operations. It is too early to tell if we will have to make further changes—it has only been two and a half weeks. My expectation is that by the time we get to GlassBuild America I will be in a position to talk more openly and publicly about what we may want to do about any shift in strategy or internal changes that will be necessary. It is too soon now but a review is underway.
DWM: What are the biggest challenges facing you in this job right now?
Griffiths: It’s three fold. One, it’s taking a close look at where we are with our ERP implementation and where that goes in the future—(see editor’s note above regarding the end of the ERP program) this is a very large undertaking and is the first issue I need to get my arms around.
The second is trying to better understand what the future may hold with Nichols Aluminum. We have made great strides operationally and we are close to the point that the business is as good as it has ever been from a pure operations and efficiency standpoint, but we are at the mercy of the commodity market.
Third, there is very clearly starting to be a rebound in building products. My belief is that we are at the bottom and ready to take off. The question is how fast is the recovery and how soon will it really take root–we have seen a few false starts this year. At some point, it will snap back and snap back fast and I want to make sure we will be ready to take advantage of that. The homebuilders are caught in that trap right now. I do believe the demand is greater than the supply they are creating. They are having difficulty getting up to speed due to labor, etc. I am sure they would prefer to keep demand in front of supply. I want to make sure we are ready when it comes.
DWM: What are the biggest opportunities available to Quanex?
Griffiths: I think it is to do a better job with our organic growth program by cross selling to existing customers. We have spent a lot of time getting ready for that and are ready to execute.
DWM: Is there anything else you would like to tell me about your new role?
Griffiths: No; at two and a half weeks in I think that is good for now [laughs]. Maybe we can explore some things in depth in September.
DWM: I look forward to it.
Tara Taffera is the editor/publisher of DWM/Shelter magazine.