It is hard to imagine anyone turning down B. Edward Ewing.
An amiable, 57-year-old, self-made man, Ewing can chat about cars and trucks, his working-class childhood in rural southern Indiana, the ethnic restaurants around Detroit and sports trivia. But get him on the topic of commerce and ethics, and he is like a hellfire-and-brimstone preacher at a three-day tent revival.
When Ewing discusses the ``capitalistic free-enterprise system,'' it is with an emphasis on the words that makes it clear they should be viewed in bold print. He has a sermon about integrity, performance and profit, and has brought it to a business he believes strayed from the path of righteousness in pursuit of revenue growth at all costs.
``I came to the automobile industry because I believe the automobile industry has violated the laws of economics for too long,'' he said. ``The laws of economics are mad, and when the laws of economics get mad, you have to change.''
Ewing, chief executive officer of Carlyle Management Group, began his latest rescue mission in one of the most unlikely ways: with the purchase of Key Plastics LLC from bankruptcy last year.
Now Carlyle Management is following up that acquisition with the creation of Key Automotive Group, a buyout business that will purchase troubled auto suppliers and give them the tough love and tough business principles Ewing and his backers believe they need to survive.
``We all went to the same school, the school that says that you come up with ideas, that there are goods and services that must be paid for through sales, and everyone has to make a profit. We all know that. It's page one, paragraph one of every business book,'' Ewing said July 11 at Key's Novi headquarters.
``How did we stray from that?''
Key Plastics was one of the prime movers in the early phases of the industry's move to consolidate its supply base. Between 1995 and 1999 Key went through a series of acquisitions that boosted sales to $500 million, from $300 million. It went from nine factories in the United States and Mexico to 34 in nine countries.
But those acquisitions came at a price, and in March 2000 the injection molder filed for Chapter 11 bankruptcy protection with more than $300 million in debt.
At the same time Carlyle Group, a Washington-based investment firm, was forming a new unit, Carlyle Management Group. Unlike Carlyle's other holdings that specialized in management buyouts of strong companies, CMG would seek distressed businesses and take an active role in running the businesses.
Ewing credits his own background for giving him wide-ranging expertise in all the parts needed to run a solid business. He began as an engineer in the commercial truck business, moving through that organization to handle material scheduling, procurement and production. With General Dynamics Corp. he oversaw product planning, engineering and production in a career that had him working on tank systems in metropolitan Detroit.
At CMG, Ewing assembled a team of turnaround experts to handle different pieces of a troubled company with a goal of improving the business as a whole. Key Plastics fit right into the plan.
``I'm a little sadistic, maybe, but I get excited whenever I find a company that has all the things wrong - and, by the way, Key Plastics kind of did,'' Ewing said. ``From the bad deals to the too much debt, to not being focused on quality, schedule and performance.''
Ewing used both his own money and the fiscal power of Carlyle Group to buy Key - Ewing makes himself the biggest single owner of every investment operation. The team paid $175 million for the assets, and Ewing took the CEO post, a title he holds with all of CMG's investments.
Key's troubles were widespread. More than a third of its components were produced at a loss. One of its three divisions - door handles, interior trim and under-the-hood, executives will not say which - had costs at 104 percent of revenue.
Quality was hurting, with production managers reporting defect levels they expected to hit for the next month, rather than the actual defects as reported by their customers. The sales force had no real link to production costs and, with their pay based solely on commissions, no incentive to learn more.
But with the company at its lowest, Ewing said Key was primed to recover.
Nearly all of the senior management was gone, leaving Chief Financial Officer Larry Schwentor the highest-ranking executive. Ewing's strategy was to challenge the remaining managers to rise to the occasion, rather than clearing the slate and bringing in all new people.
``I believe that for a company to change, the behavior has to change,'' he said. ``If behavior changes, you don't need to change the people.''
The team also decided the same held true for the name. Changing the letterhead would not fool anyone - customers, suppliers or employees.
``It would be easy to change the name and hide,'' he said. ``I call changing the name phony.''
Key had maintained a list of problem areas, but it had no one assigned to fix them, Ewing said. CMG created a corrective action team in each division, in each operating group and in each plant. Managers were given access to the company's books so they could see the impact of every decision.
``It's a totally different world,'' said Richard J. Blough, a five-year veteran at Key who is now senior vice president of human resources, communications and legal affairs. The firm keeps its books closed to outsiders, but Ewing said Key will be debt-free within five years.
The change in the way of doing business has permeated to the shop floors.
At Key's Howell, Mich., injection molding and paint facility - a 235-employee operation producing door handles and latches - pages of typewritten and hand-written ``corrective action reports'' are tacked to bulletin boards at the entrances and exits. Foremen, press operators and the maintenance crew can take note of problems or concerns, and General Manager Larry Davis and his staff must respond in writing.
There are notes about a missing security rail, questions about how the company will coordinate vacations so there are enough people on every shift and queries of how the plant will use the money designated to spruce up the building.
For the first time, Davis said, hourly workers also are looking at production issues that have plagued parts for years. The new Key rewards improvements with bonus checks linked to how the company does as a whole and how each plant performs.
In the past year, the Howell plant has gone from a defect rate of 250 parts per million to 10.
As Key Plastics improves, Ewing and his team are looking to expand their vision. Key Automotive Group - with Key Plastics as one part - will seek out a variety of businesses that are suffering under heavy debt loads. The group will open a new office in Novi, Mich., this fall, less than a mile from the current Key Plastics headquarters.
Ewing is determined to establish a new reputation for the Key name in Detroit as a solid business that has emerged from past struggles even stronger.
``It sounds like things are going well for them under Carlyle,'' said David Eberly, senior managing director of Beringea LLC, a Farmington Hills, Mich., consulting group. ``It goes to show what access to capital in combination with visionary oversight and an entrepreneurial spirit can accomplish.''
But Ewing and Carlyle Management are not necessarily going to have it easy. In Detroit's insular business community, he is seen as an outsider, interested only in making a quick buck. Rumors continue to circulate that Carlyle will dump Key Plastics as soon as the price is right.
Ewing maintains, however, that he is not looking to get out.
``We're in the business of selling and exiting and making money, yes, when we believe it's optimum. I don't believe that's now. We could do that right now and get a very good return on this company. Not doing it.''
The firm's very name also stirs up bad blood for suppliers that lost millions of dollars when the old owners declared bankruptcy.
``If he wants to clean up their name, all he has to do is pay the bills,'' said Ron Vaagenes, whose Motor City Mold Inc. had more than $1 million in unsecured debt from the old Key Plastics. He still has no idea what it will receive through the bankruptcy court - or when payment might come.
He had to lay off seven of his 15 employees when Key Plastics filed, and use money from his own pocket to pay his vendors and keep his Plymouth, Mich., business open. Motor City Mold will not do business with the new Key Plastics, he said.
``I was so devastated,'' Vaagenes said. ``As far as I'm concerned, they're parasites. They're like sharks at a feeding frenzy.''
``I can't do anything about history, the people who didn't get paid, the people who lost money,'' Ewing said. ``I could not be more apologetic, but this management team didn't do that.''
Instead, he intends for Key to take the forefront of a new automotive industry that respects the basic laws of business, and, in doing so, protect every link in the supply chain.
``We're all in the same game,'' Ewing said.