key note best practices in operational ... - tma · practices in operational restructuring process...

Key Note – Best practices in operational restructuring process

Petr SmutnýBusiness Recovery LeaderPwC CEE

www.pwc.com

PricewaterhouseCoopers Česká republika,

s.r.o.

Agenda

Operational restructuring – key areas and prerequisites for successful restructuring

Case study – operational restructuring of Tatra


s.r.o.

When is the right time to start with operational restructuring?

Strategic crisis

Profitability crisis

Liquidity

crisis

IncomeStatements

The problemappears on the:

Balance Sheet Cash Flow

MIN

MAX

Insolvency risk

Right time for operational restructuring

Corporate crisis curve

June 2017

3


s.r.o.

Operational restructuring is often a synonym for cost cutting, but it is only one aspect that can sometimes be even damaging in long run

• Owners in the role of management

• Bad investments

• Missing strategy

• Bad product mix

• Complex corporate structures

• Poor data, controlling and planning

• Inefficient processes and systems

• Low productivity

June 2017

4

Typical profile and reasons for crisis

Usual reaction: COST CUTTING

Optimal reaction: COMPLEX CHANGE


s.r.o.

Operational restructuring is a complex change where all business & financial aspects need to be taken into account…

5

Strategy

Finance and liquidity

Company structure

Sales

Supply Chain Management

Production

• CF and working capital management

• Financing and debt structure


• In house production vs. outsourcing

• In house R&D• Planning and Efficiency

Production

• Purchasing• Logistics


Operational restructuring

• Business model• Markets, product lines, M&A

Strategy

• Ownership structure• Intragroup relationships

• Organisationalstructure

Company structure

• Product portfolio

• Marketing and pricing

• Sales activities

Sales

Operational restucturing – key areas

June 2017


s.r.o.

…and usually takes from three to twelve months

6 – 8 weeks

time

Stabilisation of the company / liquidity management

Operational (and strategic) restructuring

Financial restructuring

Regular independent monitoring

IBR

Restructuring process

3 – 6 months

3 – 12 months

6 – 12 months

Complete turnaround process

Quick wins

6 weeks

June 2017

6


s.r.o.

Mix of key success factors is a prerequisite for a successful business turn-around – the management is crucial

KEY DRIVERS

KEY

SUCCESS

FACTORS

Sense of urgency –buy in from all

employees

Regular monitoring of implementation

Timely re-aligment of plan

Clear strategy of whole restructuring

Detailed operational restructuring plan with goals and responsibilities

Strong management –CRO – with clear mandate

June 2017

7


s.r.o.

Operational restructuring of Tatra

June 2017

8


s.r.o.

TATRA is the oldest vehicle factory in Central Europe and the second oldest in the world

TATRA - historical facts & higlights

• 1850 - Ignác Šustala begins the production of carriages and coaches

• 1923 - Hans Ledwinka introduced “TATRA vehicle concept” (central load-carrying tube and directly installed air-cooled engine and transmission with independently mounted swinging half-axles)

• Visionary concepts

• Aerodynamic chassis – Tatra 600 (TATRAPLAN) - 1948

• Boxer engine – Tatra 600 (TATRAPLAN) - 1948

• Aluminium chassis – Tatra 601 Monte Carlo 1948

• Legendary trucks:

• Tatra 111 (1946 – 1962)

• Tatra 148 (100 000 pcs in CEE)

• Production capacity 15 000 trucks p.a.

• Exported to 53 countries of 5 continents

Tatra T148

Tatra T111

Tatra T600

June 2017

9


s.r.o.

TATRA was hit hard by 2008 Economic crisis especially due to late deliveries in below par quality

Situation in 2008

URGENT NEED

OF

STABILIZATION

• Full order book until June 2008

• Due to order cancellations 390 trucks on stock

• Reasons for crisis – high fixed costs, low adaptibility to market changes, obsolete structure, quality issues of engines

• Ongoing TATRA production led to:

• Disproportionate level of inventory – ca EUR 56m in material and WIP and EUR 22m in trucks

• High ARs of EUR 40m

• Excessive number of employees – 3 800 by end of 2008

• Negative operating cash flow of EUR -20m

• No available cash, excessive level of bank debt of EUR 55m

2007 2 453 300 25 54

2008 1 962 370 8 88

2009 992 140 -15 45

YearTrucks [pcs]

Revenue [EUR m]

EBITDA [EUR m]

Inventory [EUR m]

June 2017

10


s.r.o.

Comprehensive approach addressing all critical areas was defined and implemented in order to resolve TATRA´s crisis

Strategy


Company structure

Sales


Production

• Short-term stabilization• Decreased fixed costs

and break-even point• Reduction of debt,

divestments• WC optimization –

inventory reduction

• Simplification and economies of scale

• Focused R&D on core products

• Mainstream vs. Custom-made production

• Streamlined supplier structure and material flow

• Increased ability of planning

Operational restructuring

• Change in business model (core business - chassis, components outsourced)• Strategic partnership

• Divestment of non-core assets (incl. subsidiary)

• Minimisation of distorting I/C transactions

• Reduction of employees• Shareholder and organisation

structure adjustments

• New opportunities (DAF) –access to new markets and

customers• Streamlined product

portfolio• Competitive pricing

Operational restructuring - TATRA

June 2017

11


s.r.o.

Results of restructuring

• Short- and long-term stabilization, maintained continuity of business & employment

• Contract with DAF – strategic partnership

• Clear strategy and business model

• Simplification of multiple areas and ability to clearly focus on core business / strengths

• Transparent and flexible structure

• Creditors recovered 100% in several months

June 2017

12

Thank you for your attention

This publication has been prepared for general guidance on matters of interest only, and does

not constitute professional advice. You should not act upon the information contained in this

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judgment or bind them in any way.

Petr Smutný

Partner

Tel: +420 251 151 215

Mobile: +420 602 648 602

Email: [email protected]

PricewaterhouseCoopers Česká republika, s.r.o.

Hvězdova 1734/2c

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Czech Republic

key note best practices in operational ... - tma · practices in operational restructuring process...

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