The company’s troubles in 2015-17 were partly the result of rapid growth. GST had been expanding overseas through the 1990s to establish the leather processing operations needed to keep pace with its customers. In 2011, it acquired its well-established European competitor Seton, an older auto supplier that added a posh book of luxury customers to its client base.
GST later expanded into China, and it was there that price haggling with a third-party Chinese supplier of retanning and finishing services began to generate millions of dollars in cost overruns. The disputes resulted in approximately $24 million in unprojected cash outlays, according to U.S. District Court bankruptcy case documents in 2017.
Separately, GST made the decision to put itself up for sale. Black Diamond Capital Management LLC, a Connecticut private equity firm, pursued a plan to buy GST and retained Johnson to consult and help, based on his experience running factories and implementing TPS. But as the year progressed, more problems emerged at GST, and potential buyers backed away from the deal.
When GST collapsed in October 2017, Black Diamond Capital stepped in to acquire it, bringing in Johnson, who had been overseeing plants for competitor Eagle-Ottawa, to run it.
Court documents indicate that GST itself was not entirely sure why the business was in trouble, beyond its pricing spats in China.
In one instance, the documents improbably blamed the advent of ride-hailing services such as Uber for causing a decline in global customer orders. In another, the documents spoke of falling world vehicle production in 2017, which was a time the global auto industry was booming. The company also blamed financial fallout from one unspecified European automaker changing its product acceptance standards and rejecting GST’s deliveries.
“That’s not what went wrong here before,” Johnson asserted. “It wasn’t product. It wasn’t sales. Our product is outstanding. It was purely this: This was an organization that didn’t give enough attention to eliminating waste and standardizing process.”
As abstract as they may sound, “eliminating waste” and “standardization” are the unmistakable bywords of TPS, a somewhat ephemeral method copied by automotive companies around the world, including the Detroit 3 automakers. TPS proponents claim that pursuing those two goals, among other measures, will bring down factory costs, improve product quality, reduce workplace injuries and lead to various other benefits.
Johnson believes TPS is absolutely the road to a brighter future at GST, and that is how he intends to fend off competition from newcomers to the auto-leather trade.
GST employees are being asked to identify and attack wasteful daily practices and establish standardized global procedures — spelled out on paper for all to see — for literally every aspect of the business, including the factory floor, accounting department, sales office and customer price-quoting procedures. The standards describe how material is unloaded from a carton in a factory and how tools are cleaned. They specify how contracts are written, how sales pitches are made and how employees are hired. Every department is asked to eliminate waste — not merely the production floor.
“There may be some discomfort when you ask a sales executive or a finance person to eliminate waste and bring better value to the value stream,” Johnson acknowledged. “But it’s a major cornerstone of our strategy as we move forward.”
Over the past year, GST reduced its break-even point by 25 percent, said Tim Brennan, the company’s global vice president for sales, design and marketing.
“That helps us become best in class, best in cost,” Brennan said. “If we can’t get there, we can’t grow this business.”
