Raimondo didn't make too many friends among managers, either. He'd replaced the authoritative structure with participative management, boldly stripping off layers of vice-presidents and reorganizing the company into horizontal business units, each with an eye on its particular market. A few managers couldn't get past their obsession with turf. "We found the trauma of trying to change some people just very hard," Raimondo recalls. "We finally gave up and took those superintendents out and moved them into technical jobs." That's when Raimondo started to search out natural leaders to replace the supervisors.
As the new president he resolved to share all news -- good and bad -- with employees throughout the plant. But sagging gross margins, mounting losses, and a pile of debt forced him to stop. The details were simply too bloody. "I could see the fear in their eyes," he says.
In Raimondo's first year at the helm, Behlen was losing close to $20,000 a day. Everyone in Columbus knew the pillar of the community was in a heap of trouble. "You couldn't go downtown without someone's saying, 'Gee, I hear they're going to close the doors," recalls longtime Behlen employee George Werner. "People were ashamed even to work there." Gayle Gerber, a 25-year veteran, recalls, "Everyone was wondering, 'How can we lose so much money and stay open?" Dale Buell, another worker, agrees: "You could almost feel the bankers' eyes on you."
"You had to put the rumors into perspective, because they were true," says Raimondo. "I didn't think we could fail; I knew we could fail. Every step of the way, we had to overcome that $7-million loss and get some positive cash flow."
Despite pressure from the bank, Raimondo refused to sell plant assets, as was then in vogue. "I said, 'Absolutely not.' With 17 football fields, I wouldn't know how to make it work." His strategy was to make acquisitions that would enhance Behlen's manufacturing strengths and bring the plant back to full capacity. "We were driven. We knew this big elephant would not be profitable until we got more than $50 million in sales."
Raimondo believed the company could successfully switch its focus from regional agricultural sales to the national markets for livestock equipment -- gates, cattle chutes, stock tanks -- and dozens of other steel products. He wanted to keep Behlen headed in the direction he'd set with his initial acquisition, of the Farmaster line, the year before the LBO. With that purchase Behlen had gained not only a name well-known to cattlemen but also a new sales manager, Farmaster's former sales chief Allen Cooke.
There was no time to invest in research and development. Behlen needed new products yesterday. Relying on the financing know-how of his partner Steve McGill, a mergers-and-acquisitions lawyer, Raimondo compiled a shopping list of Behlen's competitors. Although the company already was highly leveraged and cash poor, McGill creatively packaged financing that supported a string of acquisitions. One seller accepted Behlen stock; another became a supplier. In later years Behlen used cash, seller financing, and even a loan from its employee stock ownership plan. "Each deal had a different degree of leverage and innovation," Raimondo says. "It was quite a balancing act." McGill adds, "It was make-your-stomach-hurt difficult."
Allen Cooke, now a key sales manager at Behlen, developed national accounts by pushing direct, efficient shipping. BMC Transportation Co., Behlen's trucking company, was a key asset in the sales pitch because it could save money for Behlen's retail customers. "Really, they're warehousing for us," says customer Dan Schoening, a buyer for ConAgra's 107 Country General Stores. "There was always a commitment to customer service. Even at the level of the truck driver, they work with you."
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Raimondo's revamping of the factory floor proceeded with dreadful delays. He applied and reapplied for grants. One federal grant for $1 million came with a catch-22 requirement: for every $1 of federal largesse, Behlen was obliged to raise $3. "We got squeezed from both sides: bank covenants and grant restrictions. The grant money was tied to what the bank would give us," Raimondo explains, "and the bank wanted to see performance first."
Over five years he was able to extract about $4 million, which he applied to the purchase of such urgently needed equipment as a Swiss-made steel welder, called the Schlatter. Since its arrival in the factory, a decade ago, the Schlatter has run 24 hours a day, every day.
In spite of the new machinery, the margins in the livestock-equipment business stayed narrow. "How in the hell can anyone make a profit in gates?" Raimondo remembers grousing. "So we kept searching. Every product customers asked for, we said, 'Can we make it? Can we buy it?"But extending the product line was just a part of the solution.
The company worked to whittle down production costs and improve quality. "We were losing substantial money, and people knew we would not be profitable until we reached 15% gross margins. In 1986 we were at less than 8%. That trend in gross margins is what we educated and educated them on." A program the employees named Awareness Is Money solicited savings ideas. "People were reluctant at first. They were so surprised to be given authority out on the floor," says Gayle Gerber, a team leader. In spite of Raimondo's determination to avoid the typical suggestion-box syndrome, workers submitted so many ideas that a backlog developed. "We had to learn how to handle the flood of ideas. It was overwhelming," Sheryl Cattau, a nine-year employee, recalls.
Cynicism was the inevitable response to every Raimondo initiative. Early attempts at profit sharing and an employee stock ownership plan had to be put on hold. And the gain-sharing goal was painfully elusive. But Raimondo's efforts were not in vain. Slowly, people got the message: Raimondo was determined to prevail. He would try anything. He even, for a time, applied Behlen's steel-bending know-how to turning out patio furniture. It was imperative to keep the huge factory active. More than once, when deadlines loomed too close, office workers joined their coworkers on the plant floor. Looking back, Behlen veterans say that when they saw employees pulling together that way, they knew the company was out of danger.
But that's not what the numbers said.
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No matter how skillfully a CEO rallies the troops, the success of a turnaround depends on cash flow. Behlen was making its interest payments but was still staring down the wrong end of the profit-and-loss statement. "When you start from $7 million in losses, you're not going to get profitable in a year, but we didn't think it would take five years," Raimondo says. Accounting firm Arthur Andersen didn't wait that long to issue its dour opinion: Behlen was not a "going concern," it said in 1986. Raimondo's eyes turn steely at the memory, and his handball opponents from those days can attest to his mounting frustration. Even though 1987 revenues took a leap up, the "going concern" opinion made the lenders skittish, and Raimondo found himself scurrying for capital.
