Wednesday, 31 December 2003 17:00

Diverse businesses blend to form fast-growing recycling company

Written by Karyn Hendricks

"When people think of auto parts recyclers, the perception is of small "mom- and-pop" businesses," according to Ron Sturgeon, senior vice president of operations one of the nation's largest automotive recycling companies, Greenleaf. "They don't realize the magnitude of the business and its impact on the economy. And they don't think about the contribution this type of business makes to the tax base and employment base." 

The goal of Arlington, Texas-based Greenleaf is to bring higher quality, increased professionalism, more "best practices," scalable systems and the enhanced use of technology to the auto recycling industry.

 
In order to accomplish these goals, Greenleaf has brought together some of the most talented people in the industry, supplying them with the resources necessary to meet those goals.
 
Ford creates Greenleaf
 

In 1999, Ford Motor Company Chairman Jack Nasser had a vision of "owning" the customer from the time a car was purchased until the consumer was done with the vehicle, related Sturgeon. As part of that vision, Ford acquired a group of recycling centers, forming Greenleaf.

Ford reached out to independent recyclers, coming to see their operations and making compelling purchase offers. Sturgeon was one of those independent recyclers approached. He saw this as an opportunity to turn his past hard work into a lucrative future. Not only did he sell his business, but went to work for Greenleaf as well.

Sturgeon started in the auto repair industry in high school by learning to keep his own VW running. In 1973, he turned his knowledge of VWs into his first business venture, AAA Bug Service, and soon began working on other types of imports. He started doing collision repairs in the late 70s, while he also bought and sold cars. In 1980, he took 35 wrecks, hired one employee, and opened a salvage yard. Within nine months, he closed the repair service to focus on the salvage business, AAA Small Car World.
 
In 1998, Sturgeon decided that he had grown his business as much as he could as an individual owner, and did a private stock offering to raise expansion capital. He believes his experience is a good lesson for other small business owners, stating that "70% of a much bigger company was worth more money than 100% of a company that belonged only to me." Bringing in investors helped make the business more attractive to an outside buyer, which ultimately turned out to be Ford.
 

"I believe my experience of selling to Ford was less difficult because I had already taken on shareholders and made the transition from the idea that 'this is my business and I can do whatever I want,' to becoming accountable to investors. This helped prepare me for my position in a large company where I had to work in a team framework with other professionals," Sturgeon explained.

Sturgeon continued to work for Greenleaf for 18 months, while serving on the CEO's Advisory Board and dealing with strategic, integration and best practices issues. In 2001, he left Ford and founded North Texas Insurance Auction, which he later sold to his largest competitor in the industry, Copart. In addition, Sturgeon is a founder of United Recyclers Group (URG) and co-author of "How To Salvage Millions From Your Small Business," a guide for all small business owners, not just the auto parts recycling business.

Management team has Ford background

About three years after forming Greenleaf, Ford Motor Company subsequently decided to refocus on what they did best - manufacturing new cars. Greenleaf and other non-core operations were put up for sale. Sturgeon was contacted by Dixon Thayer, who inquired as to whether he would be interested in joining with Gregory Winfield, Brian Nerney, and himself to discuss the viability of pursuing the opportunity to purchase Greenleaf from Ford.

Greenleaf President and CEO Dixon Thayer had been the CEO of Ford's Diversified Consumer Services Division, a $3.5 billion global holding company, when he left Ford in January 2002 to pursue the acquisition of Greenleaf.
 

Prior to joining Ford, he held successful leadership positions in several different industries and companies at critical times in their evolution. Thayer is the founding senior partner of ab3, parent company to Greenleaf.

Sturgeon recalls having some concerns about working with Thayer, "I wondered what the partnership would be like because Thayer came from a high corporate position. As it turned, out he is the best partner you could ever hope for. He is really down-to- earth, with a lot of common sense and is a good listener, as well. This is a complicated business and he is willing to learn."
 

Thayer brings a polished, diplomatic professionalism to the team. He manages all different kinds of personalities. He insists upon accountability and is goal-oriented. I've learned a lot from him about how to focus on the task and get results. It has been a very enriching experience for me to be part of this team."

Winfield controls the purse strings

Senior Vice President of Finance and Administration Gregory Winfield also spent time working with Ford's various subsidiaries, including Greenleaf, developing profit improvement strategies. He also wrote and delivered a series of training programs (Managing for MoreĀ®) for site, regional and corporate personnel to highlight how to implement action plans, which tied improved business performance to employee compensation.

Winfield has held line management leadership roles with profit and loss accountability for all aspects of a Fortune 200 consumer products firm in both the United States and Mexico. "Winfield is very intense about financial matters and profitability," asserted Sturgeon.

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The high tech connection

The team is completed by Chairman Brian Nerney, who is founder and chairman of Sundial Capital Management, a stock hedge fund. Nerney was previously co-founder of Clearwire Technologies, a broadband wireless service provider and Vice President of Sierra Technologies, where he was responsible for corporate development.

Nerney has been an investor and adviser in the automobile salvage industry since 1981, where his areas of involvement included inventory valuation techniques, accounting and IRS audits, bank financing and private placement. He also served on the Board of Directors of Actual Systems of America, a company which produced the Pinnacle yard management software system for the automobile salvage industry. In addition, he was an investor and board member of Sturgeon's company North Texas Insurance Auction.
 
 
"Brian is financial friend," explained Sturgeon. "We met in the early 80s before computers were business necessities. He helped design a program to manage inventories. He was intrigued by the auto salvage business, so he agreed to help me grow my business, lending his understanding of inventory, accounting and finance. We had an informal agreement that some day, when I made it big, I would give him a piece of the business. It was a very entrepreneurial arrangement. Very few people will help you for the prospect of eventually becoming partners." 
 
The diversity of personalities and experience is very healthy for the Greenleaf management team, notes Sturgeon. Combining entrepreneurs who have dirty fingernails and scars on their bodies with folks from the top of the corporate world brings a perspective that balances the management team. The entrepreneurs have "been there, done that" - dealing with employees and handling customers one on one. Sturgeon brings the "how do we get the parts off the cars and sell them." He understands the collision industry because he was a part of it for so many years, while his partners each bring a different corporate expertise to the table.
 

Market is growing

The Greenleaf team is excited about the market opportunities. The insurance companies are clamoring for more recycled parts to lower severity rates, Sturgeon explained, and "collision repairers are skeptical but optimistic that our industry can provide those parts. [Body shops] realize that as the cost of repairing a vehicle rises, recycled parts may often make the difference as to whether a car is repaired or not.

As large as Greenleaf is, it is less than 5% of the industry. Growing just a few percentage points brings in a lot of business.

The Greenleaf procedure

When a vehicle arrives at Greenleaf, it is entered into the inventory management system. The VIN number and scrap title are verified to ensure the vehicle is branded for sale parts only, and the vehicle limited warranty is cancelled at the customer's request. All the fluids are drained and disposed of in an environmentally responsible manner. Every vehicle undergoes a detailed inspection after which experienced, trained technicians dismantle the vehicle.

Non-recyclable components are removed and destroyed. All salvageable parts are bar-coded with VIN, stock number, year, make and model. Parts are then uploaded to the computerized inventory and warehoused. Each saleable part is made available in the sales inventory system and the scrap vehicle hulk is crushed and recycled to ensure proper final disposition.

Seeking continued growth

Greenleaf aspires to become the world's leading automotive recycling organization by creating a business advantage for customers through "On Time - As Promised" delivery of quality recycled parts and outstanding customer service at a competitive price.

Larger repairers require a much higher level of service needs; they have through-put requirements and need to know with some degree of certainty that parts will be delivered on time and be exactly what they need.

"More and more people are acknowledging our presence and realizing what we do," said Sturgeon. "Years ago, a lot of do-it-yourself mechanics made use of salvage parts, but now most of our focus is on business to business clientele. In the 80s, 50% of the business was retail, which has dropped to a mere 10%.

"Greenleaf still has some growing to do. As large as our product base is, we still don't have the product 30% of the time. Because of our commitment to customer service, we attempt to find that part through other resources to keep our customers satisfied."

Concludes Sturgeon, "our goal is to achieve what Ford envisioned - to build a top-flight organization. It is a goal that is within reach."

 

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