Company Report: Magal Engineering Ltd
Magal Engineering Ltd Gamil Magal is not the only entrepreneur who specialises in turning round failing companies, but he has to be one of the most unusual. His energy is phenomenal, his grasp of his business is comprehensive and his vision simple, if ambitious.

Gamil Magal is a mechanical engineer who was involved in his first MBO with Coventry Pressworks in 1987, just two years after his arrival in the UK from Israel. Ten years of experience working for established companies such as GKN and Adwest Steering convinced him that the main reasons for the decline of UK manufacturing were poor management and inefficient systems. Since 2002, when he led a buyout of Adwest Engineering from its then owner Dura Automotive Systems, he has acquired and restructured no fewer than ten companies out of liquidation or administration, and these now form the core of his international group. These acquisitions include the Dura companies Western Thomson Controls Ltd, Metallifacture Limited, Adwest Cables Limited in the UK, Dauphinoise Thomson and Bowden SAS in France, and a 45 percent stake in Western Thomson India, in Chennai, India.

In addition, FTW (Tamworth) Sales and Portland Pressings were acquired in 2004, followed by AP Driveline Technology Ltd in 2005. "All of the Magal companies are household names within the automotive industry," says Gamil. "Western Thomson was the company that invented the thermostat! All of these companies were suffering huge losses when I bought them, and the reason for that was very poor leadership. Within six months I can turn around a company from loss to profit, using the same people, supplying to the same customers, with the same tools and equipment and operating from the same factory. The Magal production system has been tested ten times now in the UK and other parts of the world. I developed the system when I was working for other people; I realised that what was missing was the flow of information from the shop floor that management could use to make strategic decisions and consequently help employees to understand operational and cost issues."

Simple solutions
He makes it sound so simple. "I like to look at things in a commonsense way," he says, "so when I saw a management team that didn't know what was happening on the factory floor, to the extent that they couldn't even come back and tell me what needed to be changed, I realised that they were creating problems for themselves. They would employ more people to achieve increased production, instead of investigating the reasons for the shortfall and how output could be improved. They would go ahead and spend millions on unnecessary capital, because they couldn't see that the problem was equipment utilisation, not lack of equipment. The only result is that production becomes even more inefficient!"

As they lost confidence and trust, customers were taking their business elsewhere. It takes some time to rebuild customer confidence, and Gamil is well aware of that. "When we buy a company, we anticipate that turnover will drop by 25 percent during the first year. The first priority of the receiver is to approach the existing customer base and tell them that they will see an immediate price increase of 40 percent - purely to cover their own fees. So the customer isn't just dealing with an inefficient supplier, he is also faced with increased prices. An automotive customer cannot simply change their source straight away, but they can start to shop around and look at the alternatives, and if they get cheaper quotations for the same contract, they will pull the plug."

However, customers are starting to realise that when Magal buys a company he will make it viable - and within a very short timescale. In some cases, he can point to quality standards of zero PPM (the automotive industry ratio of defective parts). "If the supplier doesn't have a handle on quality, then the customer controls the business. Quality is the first issue we resolve. Secondly, we make the employees aware that every task must be carried out on a 'right first time' philosophy, to eliminate the cost of reworking." "The factories" he adds, "should plan to complete production work within five days, to include a half day on Friday for maintenance". If the car park is deserted on a Friday afternoon, then Gamil knows things are running smoothly!

By the time Magal bought AP Driveline Technology, a company facing imminent liquidation, the system had been thoroughly tried and tested. His team explained and demonstrated to the shop floor staff how the other Magal companies had been transformed. The existing AP management were given the tools to determine their own success. "They don't need to be outstanding managers to achieve good results: just competent ones. If they are provided with the right tools, the right systems, and perhaps even the right manuals to help them follow standard procedures, and they understand how to use them, the results are almost certainly guaranteed to follow.

AP was purchased from administrators for £1 million. It was, according to Gamil, a 'basket case', with high absenteeism and low morale. Magal invested a further £2.3 million in working capital, restructuring, and continuous improvement, and morale improved immediately. "Absenteeism at AP is now at less than one percent, and its employees are unstoppable, they are so enthusiastic. Before, there was a very strong union presence

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