Macrochange at Microporous: Battery separator manufacturer attempting Phoenix-like rebirth
By Scott Robertson
Travis Cunningham, production manager at Microporous, Inc., has seen good days and he has seen bad days, and he knows the difference. The good days, he says, are finally here. For most of the last decade, Cunningham and his colleagues at the Piney Flats manufacturing facility felt they were working in the dark. “They (new management) have come in and turned on the lights,” he says.
The darkness metaphor is almost literal. In the not too distant past, even basic concepts such as proper lighting and safety procedures were not receiving the attention employees felt they should. The number of accidents per 200,000 working hours reached a high mark of 10. By contrast, under new management, the plant had that number down to 2.8 last year. “Travis and his people spent six months training our people on hazard recognition,” says Jean Luc Koch, Microporous CEO. “It is part of a complete change of culture. The people here had to start thinking about safety. But the great thing is that when people start thinking, they start thinking not just about safety, but about improvement. Then the wheel starts moving and everybody starts getting excited.”
Today Microporous is the world’s third-largest manufacturer of separators for flooded lead-acid batteries. But to understand why the company’s culture was in such need of change, one must look back into its history.
The Microporous timeline dates back to the old American Rubber Company, which patented the first rubber battery separator, Ace-sil, in 1934. Amerace bought ARC in 1953, opening the Piney Flats, Tenn., manufacturing facility in 1971. Twenty years later, Microporous Products, Inc. was created through a leveraged buyout. In 2008, Microporous was purchased by Polypore/Daramic, and that’s when things began to get interesting.
“Polypore has grown by acquisition,” Koch says. “Anyone that was making polyethylene battery separators was at one time acquired by Polypore. Their growth has been through acquisition – buy the competition, whatever their products, keep it for a year, maybe two, then shut it down, control the market. That was exactly the same strategy they used when they bought Microporous in 2008.”
The Microporous acquisition, though, took Polypore a bridge too far. Polypore Daramic customers complained to the Federal Trade Commission, which raided Polypore’s Charlotte offices a few months after the Microporous acquisition.
“A few months later,” Koch says, “it was already clear there was no way Polypore could keep (Microporous) because the evidence included board presentations justifying the acquisition for controlling the market, increasing prices – it all had the FTC just saying, ‘Wow!’”
The legal process that led to Polypore’s divestiture of Microporous took six years, during which Polypore made little investment in the Piney Flats facility, knowing the plant would soon be in the hands of a competitor. For Piney Flats employees, Cunningham says, those were the dark years.
“There was appeal after appeal and motion after motion,” Koch says. “It went to the Supreme Court, that declined to review the case in June 2013. At that point, the decision became final and Polypore had six months to sell the company or it would be taken over by the FTC, who could have sold it for a dollar.”
The eventual new owner of Microporous, a New York-based equity partnership called Seven Mile, knew it would have certain FTC-granted advantages in its competition with Polypore (Microporous can hire employees away from Polypore, but Polypore can’t raid Microporous’ team), but also knew it was acquiring a distressed asset.
Koch believes Polypore knew in 2008 it would eventually have to sell Microporous and compete against it, so the giant wanted to leave the smaller company as weak as possible. “They cut all the heads, so for five to six years the plant operated totally blind,” Koch says.” There was low visibility, low direct contact with customers. The people here were cut from the market, from conventions and expos where they might learn about innovation. Six years is a long time.”
When Koch came on board in late 2013 he began building an experienced new management team, changing the corporate culture and putting a new research and development structure in place to come up with new product ideas as quickly as possible. “We brought a lot of people into the organization chart who know the business so we could maintain customers and bring credibility to the business, but the challenge to come back to where we started was R&D.
“We didn’t really start from scratch,” Koch says. “Sixty percent of the upper management were not here two years ago. It’s a huge change. But even though our entire R&D department is new, the head of R&D used to be quality manager. Our director of technology was the No.2 at Polypore in the R&D department. Our director of engineering was the director of engineering global for Polypore. We have several process engineers we took from Polypore. Our operations manager, Roger, was Daramic Operations Manager for North America, overseeing sites in Kentucky and Indiana.”
Having now invested between $2 million and $3 million in R&D, the company is halfway through its first testing cycle, Koch says. “We have some promising results, so we hope to have our first breakthrough six months to a year from now.”
In the meantime, Microporous is working to spread the word about its culture change. Outside its walls, the company is scheduling meetings with customers to learn how it can optimize its products for their specific needs. “Our competition today has enjoyed a little too much market monopoly for too many years and they forgot about that,” Koch says of customer service. “This is great for us.”
Inside the plant, the difference in management styles is obvious, says CFO Ed Feaster, even in how the facility is laid out. “We used to have offices in seven different areas of the plant, so you’d have manufacturing engineering in one place, operations in another and finance over somewhere else. People weren’t talking. They weren’t seeing each other. You used to have to go over a catwalk to get to some of the offices. It was a key investment for us to cement a more team-based, open, transparent culture than we’d had in the past.”
“It’s working,” Cunningham says. “There’s definitely a more team feel to it now. It’s good.”