by Dianna Brodine, Plastics Business
The management team implemented budgetary cuts. Then, it made some more. It took a hard look at its capabilities and assessed the markets. The team developed an aggressive marketing plan, hired an expert to implement it and went to work. Today, the company’s annual sales are projected to be the highest in its 38-year history.
Honoring the past, pushing toward the future
Norm and Urmila Bhargava founded Bhar, Inc. in 1976.Bhar, Inc. was founded in 1976 by Norm and Urmila Bhargava. Norm was a professor at a local university with a Ph.D. in economics from the Wharton School of Business and, prior to starting Bhar, had no experience in plastics processing. However, the family possessed an entrepreneurial spirit and saw opportunity in the plastics industry.
“Very bright people built this company from nothing,” explained Richard Kelly, chief executive officer. “The Bhargava family started this company with General Motors as one of their first customers, and that laid the foundation for everything that has followed.”
Kelly has been with the company for 25 years, after starting his career as a CPA. Bhar, Inc. was one of his first accounts, and Kelly now is one of several long-term employees who comprise the management team that owns the company. “The current ownership team has a long history of experience and employment within the industry and the company,” explained Kelly. “After the severe downturn in the economy in the years 2009 and 2010, the management team had a high confidence level that the company and the automotive industry were in a prime position for a recovery, so the management team jumped at the opportunity to purchase the company from the Bhargava family in 2011.”
Already heavily involved in the day-to-day operation of the facility and with minority ownership positions in the company, the transition to controlling ownership wasn’t a difficult one. “We already had come through two tough years, making hard decisions to position the company in a way that allowed it to thrive,” said Kelly. “There wasn’t much of a transition to be made when the ownership change was announced.”
Understanding the market challenges
Ninety percent of Bhar’s injection molding business is in the automotive industry, both as a Tier 1 and Tier 2 supplier for the automotive and heavy truck markets. The company produces a variety of cosmetic and non-cosmetic parts found on vehicles manufactured by Honda, Nissan, Toyota, Subaru, General Motors, Ford and Chrysler, among others. These parts include automotive headlamp housings and lenses, door panel components, wheel liners, engine covers, sound management components and HVAC shielding. Bhar’s capabilities include press capacity from 200 to 3,000 tons, and the facility is equipped with two cranes. Robotic part picking is available on most presses, and the company produces approximately 10 million parts each year.
Bhar currently has 127 employees and an additional 23 contract employees in its temporary-to-hire program. Roughly 30 percent of molded parts require secondary assembly, including heat sealing and sonic welding. The company recently has purchased and installed three new 385T electric molding cells to manufacture a product line for a new customer. This equipment purchase expands Bhar’s capabilities outside of the current product focus and provides for further growth opportunities.
Bhar is TS16949-certified, putting the company in a select group of certified companies across North America. The TS process includes many levels of training and quality confirmation, and quality of product and consistency of process are a continual focus at Bhar. “The key to Bhar’s success in meeting quality standards is that the production department is ultimately responsible for and takes ownership of the quality of the parts produced,” explained Kelly. “The role of the quality department is to establish and clearly communicate the quality criteria, then perform audits based on that criteria. Maintaining a clear line of responsibility and communication between the production department and the department has been a challenge that has been met through non-stop focus by the leaders of those departments.”
Driving its own recovery
This year the future is looking bright, but in 2009, the company’s sales had decreased 50 percent due to the economic downturn. “In 2009, the entire world was focused on the bankruptcy of a major automotive OEM,” explained Melissa Smith, president. “We, of course, were very concerned because the OEM was our primary customer. Once the company went into Chapter 11, we knew all production would be stopped, so we quickly sat down and started looking at what would happen when our sales went away.”
“Bhar was in survival mode,” Kelly said. “We quickly made many tough decisions in an effort to right-size the company, minimize the losses and stop the negative cash flow.”
First up was a reduction in overhead and labor costs. Bhar reduced its inventory significantly, eliminated its offsite warehousing and began evaluating every purchase order. “We looked at every dime we were spending, going over each account to try to reduce our variable costs. We were small enough that we could react quickly,” Kelly explained, “but that didn’t make the decisions any easier.”
The hardest decisions involved labor changes. “We had good people and good friends that we had to let go because we were no longer a $20 million sales company,” said Kelly. “That was the most difficult thing, but it was necessary. Within a couple of months of the downturn in 2009, the management team knew we had to do something to survive. Bhar, Inc. couldn’t continue losing money.”
Although it was a difficult time for Bhar, the recession started a string of positive events for the company, thanks primarily to the development of a market strategy that is leading the company to its most profitable year yet. “When sales decrease by 50 percent, it frees up quite a bit of press capacity,” laughed Kelly. “Our strategy was to stay positive, cut costs, implement a sales and marketing plan and be there when the economy and the automotive industry rebounded.”
Prior to 2009, Bhar, Inc. was at nearly full capacity and heavily involved with only one customer. The Bhargava family had limited interest in expanding the building or its equipment, so an aggressive growth strategy hadn’t been developed. “When our sales dropped so quickly, it gave us the opportunity to find new customers to fill our press capacity, and we could grow very quickly without adding capital expenditures,” Kelly said.
The first step was hiring a business development manager, Jeff Baker, in 2010. “Jeff worked hard to get our name out into the marketplace,” Kelly explained. “He optimized our website activity and developed a database of contacts and potential new customers. We set goals on how much business we wanted to quote, how many customer visits we wanted to secure in the next year and how much future business we thought we could be awarded.”
Smith agreed that Baker’s expertise was a significant addition to the company. “We knew we needed to diversify because we depended too much on one customer relationship,” she said. “We needed someone who had automotive relationships already in place because we saw the tremendous growth potential in the Tier 2 sales market. Plus, we already were structured for automotive. Jeff came in with a very lengthy list of prospective clients.”
At a higher level, the management team developed a detailed business plan with job descriptions, goals and objectives. The entire work force was put on notice that a company-wide reinvention was taking place. “We needed everyone to know that – while times were tough – we had a high confidence level that we were going to come through this stronger and better,” said Kelly.
Smith added, “We had full plant meetings where we met with each shift. We couldn’t make any guarantees, but we told them we believed in where we were going and that we would be successful. There was not one single person who did not sacrifice to make sure we could get through the situation, and I can’t stress enough how much of a difference that made to our recovery.”
Bhar, Inc. was successful in surviving the downturn due to its strong management team and its commitment to react quickly even when making difficult decisions. After five years of “reinvention”, the company’s financial statements and cash position are strong once again. More importantly, much of the risk that was present in 2008 has been eliminated simply because the customer base is more diversified.
“When capacity was available, we took a careful look at other industries, and that yielded molding work with industrial sump pump pits, Adirondack chairs and children’s battery-operated vehicles. Automotive, however, remains our primary focus, and we’ve been able to diversify within the automotive industry to where we’re working with nearly all of the major automotive companies,” said Kelly.
Kelly is effusive when talking about the difference Jeff Baker made in Bhar’s recovery. Now a stockholder, Baker continues to lead the company’s efforts to get its name out to potential customers. “In 2009, we had the equipment, the building and the experience in molding, but we didn’t have experience in sales and marketing,” Kelly said. “Getting Jeff on board was the difference maker for us because we couldn’t wait for our phone to ring.”
Continuing on the right road
Thanks to the efforts of the past five years, the management team at Bhar, Inc. has a clear understanding of true cost, and detailed metrics are in place to measure and evaluate areas for improvement and growth. Now, it’s time to reassess again with a new plan for the future. The company has been reinvented, sales levels have been rebuilt and the equipment is running near peak capacity. After a deep breath, where does Bhar go from here?
“Obviously, we’ll stay cautious, because we’ve learned some tough lessons,” explained Kelly. “But, we also know we need to keep growing. Ultimately, we will look for the right opportunities, and it seems those are coming from automotive.”
Many of the opportunities are coming as automotive companies push the vehicle customization that consumers are demanding. “There has been a change in the mentality,” said Smith. “Just a few years ago, the theme was communization and costs were cut by offering fewer options. Now, the customers want a proliferation of options.” The dynamic environment fits well with the culture at Bhar, Inc., and the operations team, led by Jeremy Buechner, is skilled at responding and embracing changes. “We have the skill sets and the attitudes that are needed to react quickly,” Smith expanded. “This is the world we live in right now.”
The company also has learned the importance of having the right customers. “In the last three to four years, customer and supplier relationships are more positive,” said Kelly. “We want to help our customers be successful and they, in turn, have recognized the value of working in a partnership rather than as adversaries. Open communication leads to a win/win situation for everyone, and that’s part of our culture.” As part of its strategic planning, Bhar looks carefully at new prospects to be sure there is a fit culturally. “We interview them just as they are interviewing us,” he said. “The industry is very dynamic, and successful partnerships require a very close working relationship.”
With 2014’s annual sales predicted to outpace every other year, Richard Kelly can afford to take a step back and appreciate all that the company has accomplished. “We’re proud of it, frankly. We put a detailed plan together, met weekly, reviewed the goals and objections, asked if we were on track and just kept plugging away,” he said. “And, it worked! The company is in a good place, and we’re getting to the point where we’ll need to expand the building and make investments in capital equipment.”
With a dedicated management team in place and the lessons of the past to guide it, there’s little doubt that Bhar, Inc. will continue to lead the Fort Wayne, IN, manufacturing community in its recovery.