A multi-millionaire at the age of 41, Ian McKinnon, soon discovered that the millionaire lifestyle was not for him.
McKinnon, now chief executive of British Aluminium, made his fortune after he sold the former state-owned Leyland Bus to Volvo in 1988, having set the loss-maker on the road to profitability by leading a £4m management buyout in 1986.
But while sailing round the world’s luxury resorts on his yacht, he came to understand his true motivation in life: `I am not, and never have been, driven by money,’ says the Dundee-born Scot, now aged 50. This trait, combined with his self-confessed `A’ type personality, made him anxious for another challenge. In 1989, McKinnon went back to work.
After a short spell with venture capital group 3i, he joined Canadian-owned British Alcan Aluminium in 1991 as a consultant-cum-managing director of its flagging aerospace and speciality products divisions. In 1994, Alcan decided to focus on its core raw materials and smelting activities and dispose of its downstream businesses, including McKinnon’s divisions. Backed by a consortium of venture capital companies McKinnon led a £200m management buyout.
The buyout was finalised in February 1996, and McKinnon took charge of a diverse international group of businesses. Best known for its Baco brand of aluminium foil and other consumer products, British Aluminium comprises speciality chemicals, aluminium rolling and extrusions, aluminium gas cylinders, and distribution. Major customers include the aerospace, defence and general engineering sectors.
`Running these fast-moving businesses,’ says McKinnon, `requires a different type of culture and management style to that of Alcan which tends to focus on slow burn projects involving large capital investment with a payback over 30-40 years.’
In the year since the buyout McKinnon has begun to work his particular type of magic on the businesses, achieving turnover of £513m for last year and returning profits before tax and exceptionals of £35m.
Much of McKinnon’s style is based on his experience in the automotive industry beginning in 1969, when he joined the former Chrysler UK as a 23-year old industrial engineer at its Linwood plant in Scotland. Four years later, with British Leyland, he was sent to help sort out its Australian industrial engineering activities. This gave him his first opportunity to redirect and rationalise a business – a skill he has developed.
A year later he returned to the UK, and eventually became director of manufacturing operations for several key Leyland businesses, with responsibility for 8,500 staff.
At British Aluminium, things have continued to move fast. `We’ve concentrated more on margin improvement and value-added products rather than volume drive that was so important to Alcan.’ The challenges he faces, and his particular style of turnaround management, can be best illustrated by what has been achieved at its Kitt’s Green plate mill in Birmingham.
Serving the aerospace and defence industries with high margin aluminium alloys, it was overstaffed, with restrictive work practices. `It had the worst industrial relations in all my experience of industry,’ says McKinnon. This includes his time as director and general manager of Leyland’s Scottish operations from 1979-81 covering its Bathgate and Albion plants, where he experienced formidable industrial relations problems.
At Kitt’s Green, he says, `management was poorly directed, delivery performance was appalling and there were limited systems in place,’ says McKinnon. The business was strong technically and metallurgically but, despite this, the plant had consistently failed to make a return, even during boom years in the aerospace industry. `The key in this market,’ he says, `is to remain profitable even when the sector takes a nosedive.’
McKinnon set about changing the culture quickly, using a six-point strategy – team focus and worker empowerment, new product development, generating demand, continuous quality improvement, planning and control, and strategy development. The strategy was based on his experience at Leyland, together with management skills developed by the US consultancy Oliver Wight.
McKinnon first hit upon the Wight strategy in 1982: `I have since applied it in trucks, buses, plate and now throughout the whole of our company,’ he says.
The speed of the turnaround at Kitt’s Green has been remarkable. The business is operating at previously unrecorded levels of profitability and capacity is increasing. `We’ve moved to a business where the employees are with us, not against us and where we’ve achieved a world-class standard of continuous improvement and planning and control.’
There has been pain along the way, including cost-cutting and a strike, but the face of the plant’s human relations has completely changed. McKinnon hopes to repeat the successful formula throughout the group where appropriate.
Rationalisation has been necessary, with job cuts at the Banbury extrusion plant, which provides profiles for the automotive, electrical and general engineering markets.
There were redundancies at a speciality rolling mill in Wales and a small West Bromwich wire operation was closed.
However, he does not intend to sell off a significant number of businesses. Turnarounds are a big part of his motivation: `I get a lot of satisfaction from them, not just because of the change in the bottom line but because of the satisfaction and pride it gives the employees.’
Opportunities will come by expanding strong businesses, such as its Luxfer aluminium gas cylinder division and the chemicals division, or by turning around weaker divisions as he did with plate.
Investment of just over £20m has been agreed for plant and equipment in the UK and US to increase capacity in the plate and the zirconium chemicals divisions. Zirconium is used by the automotive sector in the manufacture of catalytic converters and opportunities for growth should come fast.
Once the company has a stock market listing, there will be better funding opportunities to grow the business through acquisition.
With profits `comfortably exceeding’ the expectations of the original business plan, he is confident of achieving flotation at three rather than five years from the buyout. But though he still has his yacht, this time around there will be no quick exit for McKinnon. Post flotation he very much expects to be at the helm of British Aluminium.