The Power to Grow

Automotive Industries, May, 2001 by Lindsay Brooke

McLaren Performance Technologies has a new strategy to escape the engineering-services trap. Sharper Image, watch out.

When Steve Rossi joined MeLaren Performance Technologies last December, his first action as its new CEO was swift, certain and highly visible to the public. And while not exactly controversial, it signaled the beginning of a major change at the Livonia, Mich., based engineering services company.

"The first time I saw our headquarters building, I thought, 'Where's the Kiwi?"' he recalls. "The company logo on the wall had become generic; it could've been from any company. We needed to rekindle our great heritage. Putting the Kiwi back on our facilities, and in all of our visual material, was the place to start."

On his first day on the job, Rossi held an employee meeting. He announced to the McLaren staff that the Kiwi, the funny little bird with the pointy beak that adorned the racecars of company founder Bruce McLaren, and the symbol of his New Zealand homeland, would officially rejoin the company name. So would the bright orange color that's synonymous with McLaren's legendary CanAm and Indy cars. Smiles and applause rang out.

It was a simple way to begin re-focusing the well-respected company, launched in 1969 as an engine development shop for McLaren's U.S. racing program. And it's part of a strategic growth plan recently approved by the McLaren board of directors.

Rossi and his team are re-focusing their company because they believe McLaren's current "core" businesses are too limited for the future. "We're a company that does a little bit of everything, and that's dangerous today," he says.

The key is to create a varied revenue stream, "to gain more control over our own destiny," explains Rossi, a committed "car guy" (see sidebar, pg. 37) who began his career in 1976 as a Ford Motor Co. powertrain engineer and continued as an engineer at Saab's U.S. distributor. "The problem right now is that we're an engineering services company that's very good at building 'onesies' of everything. And that leaves us at the mercy of the industry's boom-and-bust cycles."

Currently, the company has four primary business units. McLaren Engines ("our core and our roots," notes Rossi) provides testing, certification and R&D, as well as race engine development. The Engines unit develops the turbocharged LMP Northstar V-8 for Cadillac's LeMans campaign. It also serves supplier customers including Bosch, Engelhard, Catalytic Solutions Inc., NGK, Ishikawajima, Getrag and Orenda Aerospace.

McLaren Performance Products was established last month upon McLaren's recent acquisition of Dart Machine Ltd. in Ontario, Canada. It adds broad expertise in precision machining of cylinder heads, blocks and casings.

McLaren projects that the Performance Products unit will add $7 million to the bottom line this year. Annual growth could be 20 percent, and the unit is expected to boost McLaren's capability in taking prototype powertrains into production.

The third unit; McLaren Traction, licenses the Gerodisc limited-slip technology; which the company acquired from its inventor, ASHA Corp. Gerodisc units are used on the Jeep Grand Cherokee, and the all-wheel-drive Pontiac Aztek and Buick Rendezvous.

And McLaren Vehicle Development builds prototypes, concept and niche vehicles. It will open a new facility in Livonia, dedicated to Ford's advanced concept vehicle development and racing programs, thus freeing up space for new business in the McLaren Engines building nearby.

So what's wrong with this picture? "We're too far down the food chain; we're totally dependent on providing services to others," Rossi notes. "We want to create new opportunities that allow us to be our own customer. We've got to expand our portfolio to dampen those peaks and valleys"

The challenge of escaping the traditional engineering-services model is shared by McLaren's competitors with offices in the Detroit area. Many of them, including Porsche Engineering Services in Troy, Lotus Engineering in Ann Arbor, Roush Industries in Livonia, and Ricardo Consultants in Plymouth, are internationally known, have motorsports roots and boast strong brand awareness among their OEM and supplier customers. Industry analysts note that as the universe of automotive engineering firms has contracted during the last 15 years; the surviving firms must offer more value and services.

America's AMG?

Rossi appears to be an excellent choice to deliver both. McLaren Chairman Lawrence Cohen was searching for a new leader to grow the company and boost shareholder value. He was attracted to Rossi because of his broad industry experience and contacts, engineering background and hard-core automotive enthusiasm. Says one McLaren board member: "Steve has everything we were looking for in a CEO."

He'd been waiting for such an opportunity since leaving DaimlerChrysler. There Rossi had been vice president of global communications, a position that his former colleagues describe as a "no-win" in the fractious aftermath of Daimler's acquisition. It was much different than the top communications posts he'd previously held at Mercedes, Chevrolet and Saab through most of the 1980s and '90s.