CEO pledges to overcome poor results
4/27/2006TECUMSEH, Mich. - Calling 2005 "an absolutely miserable year," the chief executive officer of Tecumseh Products Co. yesterday acknowledged the firm's problems but described its efforts to right the corporate ship.
In bluntly worded remarks at an annual meeting of shareholders yesterday at Tecumseh Country Club, Todd Herrick, 63, accepted responsibility for setbacks at the firm, which is a leading producer of compressors for refrigeration equipment and of small engines for lawn mowers and snowblowers.
"I'm ashamed of the performance of the company," said the grandson of the founder of the Lenawee County firm, which last year lost $224 million on slightly lower sales of just under $1.9 billion.
"Should we worry?" he asked. "Yes. Is all lost? No."
The firm successfully renegotiated lending agreements, although Mr. Herrick expressed dissatisfaction with loan interest rates as high as 14 percent.
A plan to begin to repay bank loans prompted the $120 million sale last month of the firm's Little Giant pump division, which Mr. Herrick described as a "crown jewel" of the company that grew from $8 million to $110 million in annual sales under Tecumseh's ownership.
Previous leaders of the corporation avoided borrowing from banks, he noted. It is a policy to which Mr. Herrick said he plans to return. Borrowing grew in 2002 with Tecumseh's $415 million purchase of Fasco Motors, which makes small motors for cars, health care equipment, and other uses.
"We should have paid cash for Fasco," the chief executive told shareholders.
But citing management changes and new products, he promised shareholders that the company's performance will improve.
Four of six senior officers, including the head of the firm's key compressor unit, have been hired within the last three years.
Stepping to the rear of the room, he pointed to a display of more efficient and less costly compressors and motor products that were recently introduced or will be introduced soon. He said new products are the key to the firm's future. One of them, he said, offers "an exciting opportunity to put us in a leadership role."
The firm has supplied 3,000 to 4,000 special compressors to help cool soldiers in the Persian Gulf wearing vests to protect them from injury.
"Give me a chance to adjust to today's challenges, and I promise, you won't be disappointed," he told shareholders.
In a brief interview after the meeting, Mr. Herrick said he is optimistic about the future. "We've got the products and people in place," he said.
But the changes aren't likely to bear significant fruit until 2007, he acknowledged.
Asked about severance agreements recently negotiated with executives to deal with a potential "change in control" at Tecumseh Products, Mr. Herrick said they were requested by the new hires and that there are no plans to sell the firm.
Tecumseh shares closed yesterday at $23.32 on the Nasdaq exchange.
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.