Craig Muhlhauser grew up in a Cincinnati beer-brewing family, but he might be more tempted to break out a little champagne these days. After 18 months as CEO of Celestica Inc., the well-travelled executive has scored some early wins in his drive to turn around the long-beleaguered maker of electronics. Shares are up 70 per cent on the TSE this year, even after the recent market bumps. For Mr. Muhlhauser, Celestica’s story contains some classic turnaround traits – and some surprises.

Was it critical to set the tone for the turnaround in your first 100 days?

You’re right. My approach was to look at the first 30 days, then at the first three months, then at the first 12 months and then I took a look at the three years. In a turnaround, you have to take hold very quickly. You have to show relatively quick hits to show your turnaround strategy is working – and then you deal with a multitude of issues in a very focused way that will allow you to continue to show improvement. The first priority was getting the right people in the right jobs.

So you cleaned house?

We made quite a few changes – we reduced the staff by 35 per cent. We brought new eyes, including a number of internal people, to key management positions. I was fortunate to have the strong support of the board to make those changes up front, and we got some good traction early on.

Good traction? You said within two weeks on the job the results were an ‘absolute disaster.’

But we saw results in the leading indicators.

We were beginning to attract the right people to the company to do the things that needed to be done. It was a very difficult time as we weathered the first year. But once things began to take hold, the results began to flow. In the first year, we put over $300-million of cash on the balance sheet. That was the first priority – to restore the integrity of the balance sheet, and that gave us flexibility.

Was it hard to focus in the midst of all the noise and press criticism?

It was. The real challenge in a turnaround is to focus on the vital few priorities. We had created expectations in the public market, with our customers, and we didn’t live up to those promises. We had to get a difficult situation in our Mexican operations under control and under control quickly. We made some very quick changes in the management team and we put some very focused disciplines in place.

Is there something you learned during 20 years at GE that made you a good leader?

I don’t know about that. Certainly, the GE experience does give you the opportunity to take control of your own destiny. You learn at a very young age that basically the opportunities are there but you have to avail yourselves of them. The training is there but you have to take advantage of it.

The meritocracy is such that it is a performance-based organization. So it really builds a DNA that doesn’t necessarily create success outside GE in all cases but obviously it gives you a tremendous platform to build on.

You’ve said in a turnaround, there are three kinds of employees: those on-side, those on the fence, and the third who will never buy in.

It is a challenge to get everybody on board, and as CEO, you have to be realistic in assessing that not everyone is going to buy into this. They’ve heard this before, they’ve seen CEOs come and go. Let’s face it, today the world is skeptical of the CEO position and we want to stay real with the people we work with.

So you eyeball people and decide this is someone who is on your side – or not?

It’s not quite that way, but I want to be realistic that there are those people in this company that don’t support what we are trying to do – and I have to learn how to deal with it. We have to make change, change is difficult and as we make change, it is important to realize that there are people who are going to resist that change. In talking to those people, the objective is to move everybody into the column of supporters. But that is probably unachievable.

Is that the toughest thing – to cut managers loose who don’t buy in?

Absolutely – not only those who don’t buy in, but where they are surplus to requirements or we haven’t done a good job of developing people for the next generation of challenges.

Do you bring the news personally to executives who don’t fit in?

Yes, and I do that earlier rather than later. We put people in positions with the objective of making them successful. When organizational requirements change, or people have aspirations that I don’t feel they can achieve in Celestica, I will work with them to treat them properly and give them the opportunities they are looking for.

How did you know you had turned the corner at Celestica?

It’s a journey. Over the last year, we began to spend less time worrying about what we were going to do this quarter and more time talking about next quarter. I started feeling that the operations were coming under control. I saw customer satisfaction trending up. The number of my phone calls relating to problems were getting fewer and fewer. I moved from tactical day-to-day fire-fighting to getting into more of a cadence as to where the company was headed.

Celestica has shifted production to low-cost regions, reducing jobs in Canada. Yet, as energy costs soar, are you thinking about the reversal of globalization?

Very much. The labour content in many of our products is about the same today as the freight content. If you look at how the world is changing, it is moving away from looking at the price of the product and looking at the delivery cost, and, more importantly, how quickly you can get that product. We are looking at being able to customize that product specifically for you, and at how quickly we get it to you. Flexibility and speed trump size and scale.

Will you start to shift manufacturing back to North America?

It’s too soon to say, but we have both read the same articles, pointing to the economics of moving production back to North America because of shipping costs. I think a more important aspect for our industry is time. It takes 36 days to get products into Vietnam; it takes 35 days to get them out. It takes 21 days to get them here by boat, unless we put them on an airplane. So we’re going to make some changes and new investments in people in the Toronto site. If you look at Canada as a market, you see opportunities for Celestica, with its global reach, to be a big player in making it much more efficient for technology companies to get product in and out of here. We can make a big impact if we change the game. Doing business the same way – in how can I make this cheaper? – cannot be the business we are pursuing for the long term.

Are you just getting this company ready to sell?

The company is not for sale. The message is we will do whatever is the right thing for the Celestica shareholders. But Gerry Schwartz [who heads Onex Corp.] has been a very patient investor, part of the company for over 13 years, and his message to me is: Don’t pick up the paper every day and read the stock price. Let’s get this thing fixed. I think there is a lot of value in the company, and, he says, ‘I’m confident you’re the right guy to get it [for shareholders].’

Craig Muhlhauser

Title: President and CEO,

Celestica Inc., Toronto

Born: Aug. 20, 1948, Cincinnati

Education:

Masters degree, mechanical engineering and bachelor of science, aerospace engineering, University of Cincinnati.

Career highlights:

1971: Spent 17 years in General Electric’s aircraft engine and power systems units.

1992-95: Executive vice-president, Asea Brown-Boveri.

1995-97: Senior vice-president, United Technologies.

1997-2000: Visteon Corp. president

2000: Joined Exide Technologies as president, rising to CEO.

May, 2005: Joined Celestica as president.

November, 2006: Became CEO.

Source : Reportonbusiness.com