Sharp and focused

18 April 2008

For some 10 years, Glen Tellock was a background player in the operations of the Manitowoc Company. Hired in 1991 as director of accounting, he specialized in long-term planning and corporate turnaround. But early on the management team of the Wisconsin-based company recognized the grit and the gumption of the youthful Tellock. He rose through the ranks quickly, assuming the posts of controller, treasurer and chief financial officer.

Personable, curious and resourceful, Tellock became innately focused on taking the company to a new level. By the late nineties he was orchestrating acquisitions by the food services, marine and crane divisions, taking special interest in the scope and operations of the crane group. He envisioned enormous market potential for the crane division.

In 2002, he began working on the final financial models and forecasts related to Manitowoc acquiring Grove Worldwide. Manitowoc had been considering a purchase of Grove since 1997. The acquisition was “a strategic fit,” says Tellock, even though the crane business at the time of the purchase was at a low point.

Shortly after the acquisition of Grove was announced, Tellock was named president of Manitowoc Crane Group. Observers soon realized that Tellock was also a “strategic fit” for MCG. Tellock and his team carefully crafted a new vision for the crane group, greatly expanding the company's product line and global identity.

What are the milestones in your tenure as MCG president - the high and low points?

I think the high point for me is the success of the integration that we had with the acquisition of Grove, when we had the chance to take Potain, Manitowoc and Grove and put together Manitowoc Crane Group in 2002. That whole integration plan, and following the transition in 2003, is what set us up for some of the successes we are having today.

The low point was some of the things we had to do during that industry low point. Any time you have to consolidate plants, any time you have to close a plant, any time you have to lay people off, sell a business unit; I don't wake up in the morning hoping to do those things. The low points are when you have to lay people off. Back in 2002 and 2003, our US-based crawler business was off 70 percent. [Under those circumstances] you can't keep doing things the way you have done them in the past.

It's been more than three years since the acquisitions of Potain and Grove. The effort to meld together these companies must have been monumental. What is your perception of the transition and is it complete?

When Grove was sold the first time in 1997, we wanted to buy them then, but the price was too high. Strategically we knew it fit. We had our business plan and we knew we wanted to be in that business and when the opportunity presented itself, we couldn't walk away from it again. We got it for what we believe is a very fair and equitable price, so we are very satisfied with that.

The transition is itself complete. But I don't think you are ever complete. What we did is say here are the 90 and 180 day things, here's the one-year plan. And then, basically, we have set up some longer term strategies - it could be strategic things with computer systems, it could be fully integrated systems, product support - like what we are building with Manitowoc Crane Care. I think it's an evolution. We sat down and said, “Here's where we want to be.” We continue to evolve. The transition and integration are complete, and now we are back into identifying and working towards our strategic plans and business plans. We've done a lot, but there's still more to do and that's what is key for us.

What is your philosophy in running this company?

Really there are five principles, I would call them, that my management group knows that I live by. They know them very well. They are very simple principles:

• no surprises

• bad news first

• full disclosure

• know your costs

• do what you say you are going to do.

Very simply, it's to take what I know and the people we have put in their respective positions and to give them the autonomy and authority to manage the piece of business that they have. We pay people a fair salary, a good amount of money to do their jobs, and so we give them the autonomy and let them do what they do. My job is to hold them accountable. And if you go by these principles I think it's very clear. You know what the ground rules are.

[We let our] people know that it is their plan, their business, their region. I have to let them do their jobs. There are times when I don't necessarily agree to where we are headed on an issue or an initiative, but I know if their team supports it, I have to make sure I don't talk them out of it. I have to defer to their judgment. It's worked and I've been very happy with it, and there are times if they had done what I thought was right, I would have been wrong. I learn a lot from our people. We have a great team. We have an unbelievably good team.

Describe the alliance between Kobelco and the Manitowoc Crane Group. What drove Manitowoc and Kobelco to establish this union? Has it been a success? Is it mutually beneficial?

I think when you look at the two companies, Kobelco and Manitowoc, we share some of the same philosophies. They have a good product. They support their product. We felt comfortable working with them. These can be difficult relationships. We wanted to develop our small crawlers, and we just felt Kobelco's small crawler line fit the way we would do business better than some others, and it gave us the opportunity to focus on different product lines because we didn't have the resources to come up with all the new products we wanted. This filled a product void for us. We think our customers view it as successful. It's our product. It's our brand. From the outside people look at it as an alliance, but the term we use is it's a supply agreement. Again, it's our product support, our Crane Care system, our marketing strategies, our warranties. [Kobelco] just supplies us the crane.

I think it has been mutually beneficial. Absolutely. If you look at the other things we are doing, putting some of our product into Japan with the GMKs, I think it helps them from a manufacturing standpoint. Any time you can take the amount of product that we've put into North America versus what they have, I think they are very satisfied from a manufacturer basis. We still compete with them. We knew that would happen. We talked about it. They still need to manage their distribution in North America and we manage ours. Our distribution in North America is one of our competitive strengths.

For the last year, demand for new cranes in the US has been unprecedented, with MCG and its competitors hard pressed to meet demand. Is MCG sold out for 2006? What are you doing to ramp up production? Do you see this demand continuing?

Certainly the delivery and lead times are stretched. No, we are not sold out for 2006, and we are looking at other ways to expand our production levels. What is hindering our production levels is the component suppliers and not the manufacturers. At Shady Grove, we have manufacturing capacity. We can build more cranes. But we just can't get tires, bearings, components, etc. There are suppliers that are on allocation. It's not just us. Our competitors are in the same situation. Depending on the product you are talking about, some have longer lead times than others. Our product diversity gives us an advantage. Utilization rates are up in North America, rental rates are up and improving in North America, and used crane prices are up, and you are seeing inventory replenishment from the dealer base. So all that together, makes for pretty strong demand.

The financial reports for MCG over the last year have been positive. How do you view the next year in terms of sales for MCG?

Demand is good. When you look at some of the projections by AEM in their construction equipment market, in their lifting markets, we certainly would tend to agree with some of their projections. I'm not uncomfortable with that. But I think the focus for us is at the end-user level. We need to be competitive to stay customer focused. The things we did and the initiatives we took back in 2002 and 2003 were to size the business, to manage it through the economic cycles. That's our biggest challenge, to maximize opportunity while the cycle is up, but at the same time, staying with your customers and making sure they understand that we are watching where the market is going and staying close to make sure our dealers aren't stuck with gluts of inventory. Our focus is staying with the customer and taking advantage of opportunities as they present themselves.

What's your take on the national economy for 2006, and how it will impact the construction sector, and the construction equipment sector, specifically?

Again, I will refer back to AEM statistics. They are looking at the North American market being up 16 to 17 percent next year. I don't think we are uncomfortable with those projections. On the worldwide markets AEM's projections are up to 7 percent on a worldwide basis. I think what has happened this year with respect to the transportation bill, the energy bill, rental rates and inventory replenishment, it bodes well for a good year next year. From a market economy standpoint, you have oil prices which will be a question mark, you have residential growth declining, you have the fear of other energy costs. I think there are other construction equipment markets that it's not going to be as robust as it was, but it's still robust. Even though it's not 16 percent, it's 7 percent. Growth is growth, and I think people forget that. With all those things I think next year, unless there's something I'm not seeing, I don't know why our customers wouldn't be forecasting a good year.

Manitowoc Crane Care was a significant development, what does it bring to the table?

What's the phrase, emulation is the greatest form of flattery? We believe that Crane Care is a differentiator for MCG from our competitors. It is what Crane Care's slogan says, “whenever, whatever, wherever.” It's what we believe gives our product brand strength, the fact that we stand behind our equipment. It gives our products the residual values they have. Crane Care is a service business. It's run differently than the manufacturing side of the business. You treat a service business different than you treat a manufacturing business. We gave it the same level of importance that we give the manufacturing of the product. Product support is not buried down underneath in the factory somewhere.

How is MCG positioned globally? Do you have plans for more acquisitions? Any plans to purchase Kobelco Crane Company in Japan? What is the status of the China factory?

We always strive to have and maintain the Number 1 or Number 2 positions in the major markets that we serve. We do a good job of strategic planning, a thorough job of business planning, and we get together with our direct reports and talk about global issues, cross regional issues, emerging markets, mature markets. We have manufacturing in the Americas, Europe and China. Having this infrastructure, we are very well positioned compared to many of our competitors.

Do we have other things we want to do as a crane group to continue to grow, not just organically, it could be alliances, it could be acquisitions? Yes, we definitely want to do that. I don't think that's a secret. But I don't think you do it just for growth's sake. You do it because it will compliment our brands and because it has the same type of competitive strengths that we bring to the table in our markets.

Certainly as a publicly held company, there are all sorts of initiatives the analysts want you to go through. The biggest challenge is to make sure we can get decent diversity of product, diversity of geographies, and continue to bring products that our customers need and to also maximize the value of the brand.

In China, we finished construction of the factory in November. We will begin producing at the end January. Strategically, that plant gives us a foothold. We have the capacity to move production around the world as we see necessary to take advantage of markets, to take advantage of exchange rates, to take advantage of global customers. It gives us the infrastructure to be considered a global player.

MCG competes with a wide range of companies, both domestically and worldwide. How do you assess your competitors?

I think rational competition is good for the industry and for our customers. What I think is not good for the industry or the customers - is the irrational competitor. That's what we watch, that's what we assess. I'm not the kind of person who bad mouths competitors. I think highly of many of our competitors. Again, rational competition is good for any industry. It keeps us on our toes. Customers have options, and if I do what is right for my customers and I maintain the focus that I believe we should maintain with a high degree of ethics, I think we will get our share of the business.

What are the next new products in development? Do you have plans, for example, to introduce a telescopic crawler crane, a mobile self-erecting tower crane on an all terrain carrier or for capacity enhancement systems and special versions of heavy lift crawlers?

Suffice it to say that new products and product innovation are the lifeblood of our business. New products and product support are key strategies and core competencies of MCG. With Manitowoc, Grove and Potain, we have not lost that philosophy and we will not lose it. We introduced 13 new products last year, and I don't know why we would think there would be any less next year. Again we don't introduce new products just for new products sake. We listen to what our customers are saying and try to introduce products that are useful to the market. When you look at MCG, the money we spend on engineering and product support, that's a strategic decision on our part. Innovation and aggressive product development is born in our business and it will stay there.

What do you do when you are not at the office, when you are not on the road or working? How do you fit in family, fitness, fun?

I enjoy sports. I run a lot. I take a pair of tennis shoes with me when I travel. I spend a lot of time with my family. My wife and daughters are very athletic so we enjoy the girls' athletic events. I enjoy coaching [their teams]. We are very outdoors type people.

Fun has got to be a part of my daily routine. We enjoy time with family and friends, entertaining and meeting new people. I like to keep things simple and fun. I think I do a pretty good job of not letting business control me. You need to know when to say no and spend time with your family. You don't get those years back. I want to spend as much time watching my girls grow up as I can.


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