Electrical Systems Inc

The number of antique stores, resale shops and garage sales in this country lends credence to the adage: "One person's trash is another's treasure." ITT Corp. found a treasure at the garage sale of sorts hosted by General Motors Corp.'s Automotive Components Group Worldwide (now called Delphi Automotive Systems), beginning in 1992.

Although it can't be classified as trash, Delco Chassis Div.'s motors and actuators business unit (MABU) was clearly not as important to GM as it was for ITT, a company positioning itself to be more competitive in the global auto industry.

ITT -- a major supplier of motors and wiper systems, air movement components and electromechanical devices as well as ABS and other systems -- believes the March 31, 1994, acquisition of MABU was a solid strategic move.

The company needed geographic balance. It was strong in Europe in brakes and electrical systems and wanted to improve its share of the wiper-system market there. ITT had the choice of going the traditional route of starting a company from scratch and building a customer base or just cutting to the chase and buying a company with a large customer base and merging with existing business to become an instant industry force. Opting to do the latter, ITT bought 80% of MABU, forming Electrical Systems Inc. (ESI), and putting it under the ITT Automotive umbrella. GM retains 20% interest in the company.

One of the plums of this acquisition for ITT is the expansion of it's GM business to a base that already included Chrysler Corp. and Ford Motor Co. as major customers.

The three-year option agreement between ITT and GM gives ITT complete control of day-to-day operations. It inherited more than 5,300 employees and plants in Rochester, NY, and Juarez and Nuevo Laredo, Mexico. An engineering center in Kettering, OH, also was part of the deal.

The move apparently already has begun reaping rewards for ITT. Purchased for approximately $375 million, ESI is projecting sales of more than $1 billion this year. Larry Burns, president of ITT North and South American and Body and Electrical Worldwide, credits a significant measure of ESI's initial success to the efforts of the transition planning leadership team (TPLT). This was an executive committee of ITT Automotive and MABU employees who six months prior to the close of the deal began laying the groundwork to smooth the successful melding of GM and ITT people and cultures.

Mr. Burns says that MABU workers were enthusiastic about the ITT takeover because it ended months of speculation and rumor, giving them a sense of stability and direction.

A part of the euphoria, especially among the production and maintenance workers, comes from ITT's agreement to assume MABU's labor contract with the International Union of Electronic, Electrical, Salaried, Machined & Furniture Workers Local 509. This meant no concessions were given in the workforce, work rules or benefits. And while there was no union representation on the transition team, membership was kept up to date throughout.

Salaried and management employees shared many of the job security and health benefits concerns as their blue-collar colleagues, with one added feature: What advancement opportunities would there be in the new company? That anxiety was quelled in most cases because those who held key management positions with MABU kept their jobs with ESI. In fact ITT was so taken by MABU's way of doing things, says Mr. Burns, that more than two-thirds of its processes and disciplines were adopted by ESI.

ITT had challenges of its own. It had the multiple integration concerns of MABU electrical people with ITT electrical people; ESI with ITT North America; and ITT North America with ITT Europe. Mr. Burns reports that these transitions have been relatively smooth.

After a year, has the marriage been successful? From a contractual side, Mr. Burns says things are going well for the most part, but there remain a few small issues to iron out.

In the customer-supplier relationship Mr. Burns concedes that GM has been a little disappointed with some quality and response-time issues. He adds that GM's expectations of a quick fix may have been unrealistic and that the automaker may not have totally understood ITT Automotive's capabilities. Mr. Burns says, however, that he and his staff are doing all they can to resolve these issues. Because as any good supplier executive knows, the customer may not always be right, but they are always the customer.