Clayton Industries Peter Arnell Country Manager for Italy

Background

The Italian subsidiary of US based Clayton industries were hemorrhaging $1mil a month and was in its third year of loss. The subsidiary company has seen sales decline 19% in 2009 from 2008 and margins decreased from (9.5%) to (14.1%). Clayton SpA was in a real bind and Peter Arnell is tasked with its turnaround. As the economic recession deepened, the new CEO of Clayton Industries, Dan Briggs, issued a company-wide order to reduce capital use and bring costs under control while urging managers to focus on products that will position it for growth once the recession is over. The 10/10/10 plan was implemented to help reduce receivables and inventories by 10 days and reduce headcount by 10%. The “Top Four in Four” initiative was planned for each European market that would outline the goal to achieve top four in market share within four years seemed out of reach for Italy.

Clayton SpA

The subsidiary is lagging behind all countries in revenue growth since 2004 with negative sales and margin. Its receivables and inventories were about 120 days and its labor laws make it very difficult to achieve the 10/10/10 plan. The “Top Four Requirement” for Clayton SpA would be more difficult since its major product, the compression chillers; represented 55% of 2009 revenues but only generate 12% of sales for the rest of Europe. Its central air product line did not fit well with Italy’s buildings, could not compete with low prices, and did not have the brand recognition. The union labor also enjoyed high benefits but this cost was masked by favorable government projects as a result of their labor connections. High levels of staffing, poor market penetration outside of Italy due to high price, low features, changing trend for district energy systems, high steel prices, and poor bargaining agreements all attribute to Clayton SpA’s failure.

Arnell as the newly appointed President performed very well in the first weeks on the job and seemed to be the right man for the job. He comes from an Italian background and his military experience seems appropriate for the crisis at Clayton SpA which needed urgent leadership and attention. He needed to hit the ground running. His first order of business was to communicate to his front line managers of the urgency and cancelled all vacation plans. Those who did not agree was let go and replaced on the spot. He met with the FILM to come to an agreement on the reduced work hours at the Brescia plant which was also needed to bring costs down. That partnership was so successful that he was able to extend the union rep to help him refinance the company’s line of credit. Right off the