Taking the chief executive seat in October
2001, Mr. Haythornthwaite faced the ultimate leadership challenge—rebuilding
a global conglomerate with a heavy debt load. In 2002, he started
a divestment program, which included selling its Sensor Systems,
Drive Systems, Rexnord,
Throughout 2003, Invensys continued its selling strategy, shaving off
its Baan, Teccor, and Metering businesses. It also announced the decision
to sell its Appliance Control and Climate Control businesses—two
of its largest and most profitable units—and creating quite a bit
of talk amongst the financial community, the international press, and,
of course, its appliance customers.
But in February of this year, Invensys
announced a refinancing plan designed to not only put the company on
the road to recovery, but that will allow
it to keep its coveted Appliance Control and Climate Control businesses.
How is this company managing to emerge victorious in such a challenging
market? APPLIANCE recently sat down with Mr. Haythornthwaite to find
What would you say is the process that led you to the decision
to keep the Climate and Appliance Control businesses?
RH: I think first what has to be understood is why we chose to sell
them in the first place. The answer to that question is we had to. We
want to; we had to. About a year ago, as we were working through the
group of businesses within Invensys, we had already distilled a group
that we thought were good. We knew that we had to invest in those businesses.
At about that time, it became clear that the days of Invensys as a conglomerate
had burdened these businesses with significant legacy liabilities—tax
issues, legal issues, and pension fund deficit. At that point, we looked
around and there was only one option, and that was to sell some businesses
because we simply could not deal with all of these liabilities and invest
in the businesses. It was very, very, very difficult to make that decision.
I hate losing good businesses.
What made you ultimately decide to keep
RH: As we got toward the end of the year, what we found is that a number
of things had changed. The first thing was the liabilities that we had
a year ago hadn’t gotten any worse, and in fact, we were managing
them down. We saw the businesses themselves—having enjoyed the
autonomy for a year—had really sharpened up their sense of who
they were and what they could do in the markets and sharpened customer
So their intrinsic value was rising. Third, the markets were improving,
and the general economic outlook was improving. Suddenly we found our
big shareholders saying, ‘We know that you had to sell it a year
ago, but what if you didn’t?’ And that got us to the point
in saying, well, let’s not let dogma and pride get in the way of
the right answer. Let’s really ask the question: What is the best
thing to do? And we looked at this and we said, well, if we could refinance,
a lot of sense [to keep them].
Appliance Controls and Climate Controls
have always been considered by most as very good businesses. We’re
delighted we’re now able
to bring them back into the fold, and the refinancing gives them the
stability and the flexibility to invest time, resources, and energy into
What is your strategy to build those relationships?
are built between people; they’re not built in
companies and processes that keep them. Ultimately, people get together,
you respond to needs, you react to people, you bring brainpower to it,
and trust builds. And nothing that I’ve ever come across can accelerate
the building of trust.
I’m a great believer that every aspect of
the strategy has to start with what the customer is looking for. One
of the shifts I hope our customers
have been seeing recently is that they’re being listened to very
closely. Once you get to that point, everything else will follow—your
technology strategy can be delivered by a keen sense of what the market
requires; your supply chain strategy and manufacturing strategy, everything
following behind that, should be as efficient as possible. It’s
just getting those basics right. Once you’ve got the basics right,
then you can both jointly enter into a discussion that is visionary,
you can start talking about a 3- to 5-year timeframe and start building
around that as partners.
What is your vision of Invensys 1 year from
now and beyond?
RH: I think the important thing about Invensys
is that in a year’s
time, it will have buried its past—the whole story of financial
instability that completely dominated the real story, which is the industrial
And the only way we’ll have done that is because we would have
started delivering the promises we made to our financial markets. And
been made possible by giving the operators some stability and flexibility.
Invensys ceases to become the story. The story is that between the businesses
and their customers and the employees—the critical mainstays
of value creation. The basics of the strategy are really making sure
that we grow
with customers, we bring the technologies to market, we make sure that
we seek to expand geographically, and we continue working to bring our
cost base down. Delivering an environment that is far less tense than
the environment the teams had to work in for 2 or 3 years now. I think
feels better coming to work in that sort of environment.