The House that John Built

When he was hired as chairman and CEO of SPX Corp. in December 1995, John Blystone knew that turning around the troubled Muskegon, MI-based producer of specialty tools and original equipment components to the automotive industry would be no joyride. After building a solid reputation selling specialty tools and diagnostic equipment to auto dealers and mechanics, SPX had faltered, piling on new divisions and several hundred million dollars of high-yield, long-term debt. By mid-1995, the company was looking at yet another loss-ridden year and a stock fallen from $18 a share at the start of 1994 to nearly $10. To restore profitability, Blystone had to convince SPX’s 8,300 employees that change was good-though clearly some staff would have to go. Then he had to prove to them and shareholders that he was right.

His background gave him an edge. Blystone, 43, comes from a pool of General Electric talent from the Welch era-Larry Bossidy of Allied-Signal is a prominent alumnu–many of whom parlayed their GE experience into leadership positions at other industrial companies in need of change.

When SPX’s board decided to implement an economic value added (EVA) financial management system, Blystone-with a turnaround track record at GE-was selected to lead the charge. Focusing on EVA, the after-tax profits a company retains after deducting its cost of capital, gives management a framework to understand the balance between investment and profitability and to increase shareholder value. The carrot at the end of EVA’s stick is linking financial performance to compensation. SPX tied 185 executives to an EVA-based compensation plan in January 1996; a year later, 4,700 employees-nearly two-thirds of SPX’s workforce — were with the program.

“EVA financially rewards our people to act as owners,” says Blystone, who notes that division budget increases are also now based on EVA improvement. “When you create your own value, you take a hard look at capital and R&D expenditures and say, What am I going to get for this?’ People come back and say, ‘We’ve found creative ways to get done what we needed.”

To head SPX, Blystone left a promising career at GE, which he joined in 1978. Except for three years at Tenneco, he learned sales and marketing at the foot of Jack Welch’s spinning wheel. “Welch did things back in the early 1980s that people are starting to do now,” Blystone asserts. “GE is very hands-on, think outside of the box, recognize that people are a major part of the solution.”

He also grew up around manufacturing. His father worked for GE, Rockwell, AMF, and Emerson Electric. Blystone chose the competitive GE Manufacturing Management Program, rising through the aircraft engine division to become general manager of GE

Superabrasives. In 1994, he headed to Italy as CEO of GE’s Nuovo Pignone, a $2 billion conglomerate. Blystone didn’t learn much Italian in Florence, but he did add a fluency in setting companies on the right foot. SPX attracted him as a “classic turnaround situation,” he said in a 1995 shareholder letter, predicting that the restructuring would quickly bear fruit. “We expect to see a significant performance turnaround.”

So far, Blystone has delivered on his promises. SPX reported a 1996 operating profit of $24.6 million, or $1.76 a share, on revenues of $1.1 billion, as compared with a 1995 operating gain of $7.7 million or 58 cents a share. Blystone deployed Welch-like moves of selling unprofitable or extraneous units, fixing others, and growing the remaining core business. Cost-saving measures included consolidating divisions and trimming 1,100 jobs.

“He’s the most confident CEO I’ve ever met,” says Eric Goldstein of Bankers Trust, who points to Blystone’s new team, which includes GE recruits, and predicts acquisitions and expansion ahead. “They’ve got a lot of dry powder and are ready to go. I don’t think [they] left high-paying jobs to work for a billion-dollar auto-parts supplier.”

“We’re continuing to make major leaps forward,” Blystone contends. In March, SPX announced plans to repurchase $128 million of long-term debt, rendering the company virtually debt-free. In operations, SPX is focusing on the higher-margin, high value-added specialty service tool business, a less-cyclical segment that could account for 70 percent of sales in 1997, up from 53 percent in 1996. An agreement with Mac Tools, a division of rival Stanley Works, allows its sales force to distribute SPX products. And SPX is driving toward providing integrated systems, recently partnering with Hewlett-Packard to pair H-P software with SPX equipment, enabling mechanics to process repairs seamlessly from order to invoice.

With its universal scope and cost-saving technology, the H-P alliance could become the foundation for the House that John Builds. But even as he ushers SPX into high gear, Blystone is keeping an eye on the mile markers. “We’re just taking it back to, ‘We know where we’re going,'” he says. “We’ve got enough people


JOHN BLYSTONE

President and CEO

SPX CORP.

Age: 43

Birthplace: Erie, PA.

Education: BA in mathematics and economics, University of Pittsburgh.

Family: Married; two children.

Travels: 50 percent of the time, to visit customers and company operations.

Drives: 1996 Cadillac; 1996 Ford Explorer.

Most personally rewarding business decision at SPX: Implementing EVA.

Influential figures: Jack Welch, “The best business leader in the world.”

Words to live by: “Don’t tell me how you wish it was. Tell me how it is and how you want it to change.”

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