Src Holdings Corporation Business Information, Profile, and History

Company Perspectives:

Springfield ReManufacturing Corporation (SRC) has been at the forefront of the remanufacturing industry since the early 1980s when founder Jack Stack, known internationally for his development of The Great Game of Business, spearheaded an employee buyout of International Harvester's remanufacturing facilities.

Through the years we have evolved into several unique companies, each specializing in different remanufactured components for automobiles, commercial trucks, agricultural equipment and construction vehicles. Our growth and success can be attributed to quality control, warranty-backed products and an efficiency of production that generally flows from employee owned companies.

Our people make them better. That's not an idle boast. It's a statement of fact that has become our slogan and our legacy in the remanufacturing industry.

History of Src Holdings Corporation

SRC Holdings Corporation owns SRC Remanufacturing and more than 20 other businesses. Most are related to the company's original specialty of rebuilding engines, generators, and other components. The company counts 20 original equipment manufacturers (OEMs) among its customers.

One of SRC's enterprises markets tours and books for those interested in SRC's famously entrepreneurial culture. CEO Jack Stack is an author of books espousing the attributes of openness and ownership; Business Week has described the company itself as a "management Mecca."

Origins

The tale of SRC Holdings Corporation begins in 1974, records the Wall Street Journal, when International Harvester Co. formed its International Harvester ReNew Center repair division. The unit remanufactured diesel engines, transmissions, and torque converters for Harvester's construction equipment division, according to Diesel Progress. It was later known by the names Springfield Remanufacturing Corp. and Springfield Remanufacturing Center Corp.

Jack Stack was assigned to the unit, based in the Ozarks community of Springfield, Missouri, in January 1979. Then called Springfield ReManufacturing, the factory was tottering on the edge of bankruptcy, losing $2 million a year on sales of $26 million. As its name suggests, the company's business was disassembling and rebuilding diesel engines, water pumps, and other components.

Before coming to Springfield, Stack worked his way up from the proverbial mailroom to become responsible for 2,000 employees as superintendent of the machining division at Harvester's factory in Melrose Park, Illinois.

Approaching business as a game, the heart of Stack's method was to involve employees in the outcome. "It's much more than a metaphor," Stack later told Personnel Journal. "If you look at all the characteristics of a game and you look at all the characteristics of a business, you see that they're almost the same." He fostered a sense of competition between foremen at his Illinois assignment, and brought a similar approach to Springfield.

Stack set up productivity contests to get the plant on its feet. A sense of teambuilding and ownership as well as competition was encouraged. As Stack later wrote in National Productivity Review, SRC enthusiastically fielded teams against other companies at community events such as relay races.

1982 Management Buyout

By 1981, Springfield ReManufacturing was managing to turn a $1 million profit. International Harvester demanded that the Springfield plant cut production by two-thirds, however, as the parent company reeled from the effects of a recession on farm and construction equipment. Stack balked at the prospects of layoffs for the Springfield, Missouri community (the plant then employed about 120 people). He and a dozen fellow managers kept the plant running, and eventually bought it out. A new entity, SRC Holdings Corporation, was formed on December 27, 1982, to carry out the acquisition.

According to strategy+business magazine, it had taken two years to arrange financing. Stack, then just in his early 30s, was in charge of rounding up investors. Stack managed to seal the deal in spite of a competing bid from Dresser Industries Inc., which fell through at the last minute. Dresser was able to acquire Harvester's construction equipment business, noted Inc., which accounted for 60 percent of SRC's revenues at the time. Inc. also observed that SRC decided to supply original equipment manufacturers (OEMs) exclusively. After becoming independent, notes Diesel Progress, SRC entered the on-road engine market with a General Motors product and began remanufacturing engines or components for Allis-Chalmers, Thermo King, Komatsu, Mercedes-Benz, Iveco, Isuzu, Nissan, Mitsubishi, and Ford-New Holland.

What SRC's management had acquired, noted strategy+business, was a company with a monstrous debt-to-equity ratio of 89:1. The company was bought with $9 million, mostly borrowed, which had to be repaid at credit card interest rates (18 percent).

An employee stock ownership plan (ESOP) was set up, making it the largest single shareholder, with 31 percent of shares. Stack owned 19 percent of the company.

To foster a team dynamic, the company styled its weekly division meetings as "huddles." Department heads then shared the numbers with their employees at "chalk talks," where game plans were worked out. Workers and management gathered after work at nearby Joann's Expressway Lounge, noted Inc. in a 1986 profile.

The company measured everything, not just production, but also such categories as housekeeping and employee morale. One bonus was aptly named "Skip the Praise, Give Us the Raise" (STP-GUTR). In its first 20 years, Stack told Inc. magazine, the company introduced nearly two dozen different incentive programs tied to a wide array of performance targets.

Mid-1980s Turnaround

The turnaround was remarkable, according to strategy+business. Share price rose 13,000 percent by fiscal 1986. Annual sales were up to $42 million after growing 30 percent per year.

It was not all smooth sailing. In December 1986, General Motors canceled an order for 5,000 engines, representing 40 percent of business for the upcoming year. SRC scrambled to introduce a number of new product lines to avoid laying people off, Stack told Inc.

Preaching openness and financial literacy, Stack required workers of all stripes to read profit and loss statements. Along the way, he became something of a management guru, publishing The Great Game of Business in 1992 and A Stake in the Outcome ten years later. Some referred to the practice as "open management." Stack later described it this way to the trade publication Modern Casting: "The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the financial outcome, good or bad."

Diversification in the 1980s and 1990s

SRC ended the 1980s with sales of $50 million a year and 475 employees. To guard against the cyclical nature of the truck business, SRC had begun to diversify in 1985, branching out into automobile engines. The company developed its own business incubator for entrepreneurial employees, offering to fund 80 percent of the cost of launching viable start-ups. By 1995, this had given rise to about a dozen new companies, including Megavolt (manufacturer of generators, alternators, and starters) and NewStream Enterprises (engine rebuilding kits).

One of these, Engines Plus, was founded in 1986 with just $60,000. It specialized in rebuilding oil coolers. Its sales reached $7 million in the early 1990s. The Engines Plus unit sold its original oil cooler business to SRC Heavy Duty around 2004 in order to focus on producing small industrial power generators.

Stack was becoming more visible as a business leadership visionary. Inc. had named him CEO of its executive "Dream Team." He began giving summer lectures at MIT's Sloan School of Management around 1992. By the mid-1990s, reported Business Week, 2,400 people had made the pilgrimage to Springfield to study the company's open-book management. Company sales were about $104 million at the time, and there were 700 employees. SRC had earlier formed The Great Game of Business to market a two-day seminar and company tour as well as Stack's books, videos, and consulting--it alone was doing nearly $2 million a year worth of business.

A 50-50 joint venture was formed in 1998 with Deere & Co. ReGen Technologies L.L.C. remanufactured diesel engines for John Deere's agricultural and construction equipment.

Still Growing After 2000

At the turn of the millennium, SRC Holdings owned 22 companies and had sales of about $150 million a year. The company aimed for 15 percent as a manageable annual growth target, Stack told Inc.

In 2002 Business Week praised Stack as someone whose attention to relationships, openness, and focus on real results provided a positive example in contrast to the greed-driven debacles at Enron and the excesses of the dot-com bubble. Stack eschewed corner offices, corporate jets, and other executive trappings, observed Business Week.

President George W. Bush made a campaign stop at SRC Automotive in Springfield in February 2004. Bush used the visit to speak about the benefits of tax relief for the economy.

Principal Divisions: SRC Heavy Duty; ReGen Technologies, L.L.C.; Megavolt; SRC Automotive; Avatar Components Corporation; NewStream Enterprises; Encore Inc.; The Great Game of Business, Inc.; SRC of Canada, Inc.; Engines Plus Incorporated; CCRC.

Principal Competitors: Detroit Diesel Remanufacturing; Jasper Engines and Transmissions; Marshall Engines; Williams Technologies, Inc.

Chronology

• Key Dates:
• 1974: International Harvester ReNew Center is formed in Springfield, Missouri.
• 1982: Plant managers lead the buyout of Springfield ReManufacturing.
• 1986: A turnaround is in evidence; annual sales amount to $42 million.
• 1990: Great Game of Business, Inc. is formed to market business literature and tours.
• 2000: SRC has 22 subsidiaries and sales of $150 million.