So Yeoman stepped up. Eight days after burying her husband she went to work at Yeoman Engineering, using the proceeds from her husband's life-insurance policy to buy the company. (She already owned 3%, inherited from her father-in-law.) A quick study, she spent the first 18 months asking lots of questions and listening hard to the answers. When she got into a jam, she would seek advice from Denbo.
Yeoman's trust in her major customer -- in some years Wabash accounted for as much as 95% of Yeoman Engineering's annual sales -- was founded on a long-shared history. Like Yeoman Engineering, Wabash, a supplier of sensors to the auto industry, had roots deep in the community. It opened a plant in Huntington in 1953, and the two companies grew symbiotically over the years. But starting in the early 1980s, Wabash began to change. In 1981 it was acquired by Kearney-National, an industrial conglomerate based in White Plains, N.Y. Kearney itself was subsequently swallowed by a bigger fish, Dyson-Kissner-Moran, based in New York City. Today DKM is a very private industrial conglomerate operating on three continents and approaching a billion dollars a year in sales.
Shari Yeoman became captive to one very large and very satisfied customer, which kept her company so busy that it never had the time or inclination to seek out new markets.
Kearney's swallowing of Wabash was a typical response to the auto industry's relentless winnowing of its supplier pool, which has led to a Darwinian struggle favoring larger, more integrated, more efficient suppliers able to continually cut costs. "The industry says, 'Come back to us with a 4% to 8% cost reduction each year or we won't do business with you," says Joe Elkins, who recently sold his own metal-stamping business and is now a consultant to small manufacturers. The migration of manufacturing and assembly to Mexico and offshore has further tightened the screws on midlevel suppliers and in turn on their suppliers, tiny companies like Yeoman Engineering.
But as the outside world grew increasingly cutthroat, Yeoman saw no reason why life inside her company had to change. Business was about more than just making money, she maintained. Her employees were like family -- she even cooked lunch for them once a month. "Sometimes I do business with my heart, not my head," Yeoman admits.
If Yeoman treated her employees like family, she treated her customers like royalty. Her strategy was to win by delivering exceptional quality and service, vital in the auto sector, where a faulty mold can shut down a production line, costing thousands of dollars. She equipped her workers with beepers so Wabash could find them day and night. When Wabash asked Yeoman to relocate some people and equipment to the Wabash plant, she complied. Yeoman even invited Wabash, which lacked its own high-tech machining capability, to lead tours through her clean, technologically impeccable shop when the sensor supplier wanted to impress customers and close sales.
She was generous in money matters, too. After Wabash landed a big cash-flow-constricting contract with General Motors in 1990, Yeoman charged the company for material on only 12 prototype molds, deferring about $250,000 in labor costs for two years. Wabash subsequently chose another shop to make the production molds. "We carried them in that project and others," says Yeoman.
By the early 1990s, the auto industry's fortunes were soaring, but the quest for efficiencies spawned by its earlier decline had become the rule. Denbo died in 1994; in 1995, Ford, a major Wabash customer, announced it was moving much of its assembly work to Mexico and wanted its suppliers by its side. That led to a 29% cut in production at Wabash's Huntington plant.
Throughout the turmoil, Yeoman Engineering kept the faith. Mindful that her customer -- even in its reduced state -- required ever-faster turnaround, Yeoman spent as much as $200,000 a year on new technology, principally sophisticated machining tools. "If I couldn't keep the company at the highest technological level, it would be worthless," she says.
It was precisely that impulse to spend and modernize that gave Yeoman value -- and turned it into takeover bait. In 1995 the company rang up $3.5 million in sales, its best year ever. Meanwhile, Wabash was feeling continued pressure to improve productivity and integrate vertically. One way to do that was to bring some of its mold making in-house. Wabash made a list of several local tool-and-die shops it would consider acquiring. Yeoman Engineering was at the top.
Wabash prized Yeoman for its cutting-edge technology and spectacular service. According to Shari Yeoman, Wabash's offer reflected none of that. "They tried to steal the company," she says. "It was a joke."
The numbers that Yeoman provided to Inc. appear to bear her out. At the time Yeoman Engineering had $500,000 in cash and $300,000 in accounts receivable -- primarily work completed for Wabash -- on its balance sheet. It had just bought a building next to Wabash and made $700,000 worth of improvements on it. Inside that building the company had installed $1.5 million worth of equipment and a fully trained workforce. Wabash's offer? Just $1.5 million for everything.
Yeoman's attorney, Mark Guenin, who took part in the negotiations, calls the offer "low from the standpoint of any fair consideration of the value of the assets." Guenin thinks the timing of the Wabash bid was suspect, given his client's recent investments in real estate and equipment -- all made, in fact, to accommodate its largest customer. "That would have been the time when she would have been financially extended," says Guenin.
