http://www.businessweek.com/stories/1994-07-03/i-came-i-saw-i-conquered

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`I Came, I Saw, I Conquered'


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`I CAME, I SAW, I CONQUERED'

Don't ask Kajo Neukirchen whether he knows how to run a business. As Germany's foremost corporate doctor, he makes a living by snatching teetering companies from the brink of bankruptcy and preventing their collapse. Tall, rugged, and stern, Neukirchen marches in, haggles with banks, slashes costs, and axes jobs. But he's getting mighty annoyed at critics who say he's just an arrogant hatchet man who leaves behind the trickier job of rebuilding a company to long-term health. "It's much easier to run a company for 20 years and destroy it," he says with a scowl. "At least I don't destroy companies."

These days, Karl-Josef Neukirchen is giving both his critics and admirers plenty to talk about. At 52, he's immersed in the biggest cleanup job of his life. Last December, he took charge of Metall-

gesellschaft, the $15.8 billion metals and engineering conglomerate that threatened to implode after risky oil-hedging strategies in the U.S. backfired. Within weeks, he engineered a $2.06 billion bank bailout that prevented the biggest bankruptcy in German postwar history. And he embarked on a zealous cost-cutting scheme designed to boost mg's liquidity (table).

In the U.S., where turnaround specialists are often canonized, Neukirchen's blunt methods would likely draw raves. But in corporate Germany--where managers value consensus and layoffs were rare until recently--he has long been vilified as a job-killer who favors management by terror. It used to bother him that so many people hate him, he says, but not anymore. "You can't have the goal of being loved," he shrugs. "Motivation is not kissing and being friendly to everybody. It's setting targets and achieving them."

Neukirchen's reputation has suffered somewhat from the fact that not all of his reclamation projects have fared so well after he moved on. Take Kluckner-Humboldt-Deutz, a $2 billion tractor and engine company that almost collapsed in 1987. After becoming ceo, Neukirchen schmoozed the banks, got rid of noncore units, and fired five directors. Amid demonstrations and howls from the media, he slashed payroll from 26,000 employees to 15,000. By 1990, khd turned profitable--barely--and Neukirchen left for another turnaround job. Last year, though, the Cologne-based tractor maker reverted to red ink.

NIGHT WIRES. Neukirchen argues that he can't be held responsible for the mistakes of others. His role is to stop the bleeding and prepare a platform for future success. "People forget what happened in the past, and they blame me," he gripes.

When he was hired at mg, all anyone cared about was keeping Germany's 14th-largest company from being sucked into a $1.4 billion black hole of oil-trading losses. Former ceo Heinz Schimmelbusch, fresh off a $2 billion acquisition spree, had entangled mg in a complex set of U.S. oil contracts and offsetting hedge positions that ended up exploding in 1993 when oil prices plummeted.

The new CEO immediately jetted to New York and appointed Karl M. von der Heyden--the well-respected former finance chief of rjr Nabisco Inc.--to help straighten out the U.S. oil nightmare. In the beginning, Neukirchen was wiring $20 million a night to help the U.S. trading unit cover margin calls. Meantime, back in Germany, Neukirchen pored over a set of balance sheets he calls "the worst I have ever seen." Racing against the clock--a German company must declare bankruptcy three weeks after liabilities exceed assets--he hammered out a rescue plan. With the help of giant Deutsche Bank, he persuaded creditors not to shut down the company on Jan. 15.

Those who have worked closely with Neukirchen in the exhausting, exhilarating early days of a bailout deeply respect his energy and decisiveness. "He gave himself to us completely and listened carefully to our opinions," says Jurgen Dittert, personnel director at fag Kugelfischer, the Bavarian ball-bearing maker that Neukirchen helped restructure before he joined mg.

But many say it wouldn't hurt him to mellow out a bit. "His management style is rude, to put it mildly," says one former colleague. That has resulted in a particularly prickly reception at mg, a proud company that has been demoralized and publicly humiliated. A handful of key managers have left, and many who remain feel alienated by Neukirchen's aloofness. "We would like to help, if he would only ask," says one. Many thought it unusually cocky when he quoted Julius Caesar--"I came, I saw, I conquered"--in the first in-house newsletter after the bank bailout.

Surprisingly, one group Neukirchen doesn't have to worry about is labor. While laid-off workers detest him, labor leaders respect their new boss for telling them bluntly and honestly what needs to be done. Says Rainer Lepper, head of the works council at mg: "I know that our destiny as a company is completely linked to the success or failure of this man. I trust him."

NAGGING QUESTION. Part of Neukirchen's appeal to the blue-collar set is that he is very much a self-made man. The son of a Bonn laborer, he worked first to raise money for college--a rarity in Germany--then went on to the University of Bonn, where he earned both an advanced degree in physics and a doctorate in economics. After graduate school, he spent eight years working for two German affiliates of Dutch giant Philips Electronics. He staged his first turnaround when he was 34, returning to profitability an ailing Philips-affiliated wire-cable business.

Neukirchen predicts that in five years, mg will employ only about 20,000 people, less than half the number he inherited, and sales will total $8.5 billion, down from $15.8 billion in 1993. "He has done exactly what needed to be done," says Johannes Reich, an analyst with M.M. Warburg Bank in Hamburg, though Reich doesn't predict the company will post operating profits until 1996.

Still, there's that nagging question: Does Neukirchen have the creativity and vision to run a healthy company? He jokes that if mg were no longer in trouble, he would "try to learn golf, because the work would be done." But then he bristles: "I run companies--I just do it quickly and with high risk." For MG's myriad creditors, that's been a good enough answer so far.

NEUKIRCHEN'S ACTION PLAN Since Metallgesellschaft's new boss took over on Dec. 17, he has...

Persuaded banks to bless a $2.06 billion bailout plan that includes issuing new shares, establishing a new line of credit, and converting a big chunk of existing bank debt to equity.

Laid plans to streamline middle management and slash 7,500 of 43,000 jobs, saving $333 million. He'll save an additional $1.3 billion by cutting inventory, materials, and receivables.

Put several noncore businesses, such as auto parts and a heating equipment unit, on the selling block--along with MG's headquarters--to raise an additional $600 million in cash.

Focused MG on the core businesses of metals trading, plant engineering, and specialty chemicals. Plans include creating more discrete profit centers to increase management accountability.

DATA: Company reportsKaren Lowry Miller in Frankfurt


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