Yesterday I got to thinking about a company I've watched, from the sidelines, for years:
, the battered battery company that's under investigation by the state of Florida for allegedly selling used batteries as new. The stock, which traded well into the 50s in the mid-1990s on the hype that it was hot, lost its charge in the wake of the Florida fiasco and an earnings slowdown.
The stock fell as low as 5 3/8 last fall, only to get a boost of energy and climb as high as 21 3/4 on the signing of former
Vice Chairman Robert Lutz as CEO, with a promise to turn the company around.
Plenty has been written about what he's doing and whether he can. This column can't help but chime in. The more you think about it, the more you can't help but wonder whether Lutz is setting himself up to be another
. He's not lopping off heads or changing revenue-recognition policies or parking excess merchandise where you'd never expect to find it, as Dunlap allegedly did.
But like Dunlap, he wrote a book. Lutz's tome,
Guts: The Seven Laws of Business That Made Chrysler the World's Hottest Car Company
, brags that he knows the secret of running a great company. And just as Dunlap thought he could reinvent the humdrum housewares biz with snazzy marketing and fancy new products and repackaging, Lutz is trying to drum up excitement around one of the most mundane of all businesses: car batteries.
Think about it: This is a business where the price of a
, with comparable cranking power, hasn't jumped more than 20% in 30 years ($59.59 vs. $49.95). Yet Lutz, who made his name by rolling out the
, is now sounding Dunlap-esque when he talks about how Exide will soon roll out the Dodge Viper of car batteries. (An Exide spokesman wouldn't disclose details other than to acknowledge that another company has a similar battery; Exide will distinguish itself by the way it sells its battery.)
Then there's Lutz's proclamation in a press release
issued on the day he was hired back in November: "I am on record, both in my speeches and the pages of my book ... with specific ideas on how a business should run and should be run. I plan to put my principles, concepts, 'Lutz's Laws,' into practice to help make Exide not only the biggest, best and most profitable battery company in the world, but also one of the most respected Fortune 500 companies, period!"
Best-case scenario, according to the skeptics -- and there are plenty -- is that in the end, if Lutz does a great job, he'll still have a boring, low-margin battery business. Worst case, Exide will sink under the load of more than $1.2 billion in debt. "The reality is he's in a box," says one longtime Exide short-seller. "It's a business that loses a lot of money and can't service its debt." Or it wouldn't be able to service its debt if its banks hadn't waived loan covenants for several quarters to see what Lutz can do.
Two weeks ago Exide lost its five-year deal to produce DieHards for
, and did spin control by pointing out that Sears wasn't really a profitable business for Exide.
So, what is a profitable business in an industry that is ruled by mass marketers, like Sears, who want the best deal possible? The biggest margins come from selling to independent gas stations, a business that Exide lost years ago and would take years to recoup.
The spokesman says Exide plans to improve itself, in part, by doing better and smarter deals with its customers. He also says the company plans to cut costs by changing the way it runs its factories. And as for the lost Sears biz: "We also think we'll replace it quickly," he said. He wouldn't say who the replacement would be, or why it would pay Exide more than Sears, but he added, "We have at least three deals near completion. If we can replace a little over 1 million units, we'll be at the break-even point," where the company was before it lost Sears. "We made some bad deals in the past and we won't make them again."
The spokesman also said Exide also plans possibly to sell off noncore businesses, with a goal of getting the debt-to-equity ratio, now in the mid-80% range, down to 60%. When will that be?
"We don't have a time frame," he said.
But once you squeeze everything you can out of operations, and strike a few new, better and smarter deals, where does the growth come from? Therein lies the problem. Batteries are batteries are batteries. "We have no panacea or silver bullet," the spokesman says. "We never said it will be easy and quick and that we'd be able to do an overnight miracle."
With the stock down almost 20% this year, Exide may be banking on Lutz's rules to turn things around. But my favorite rule is the Greenberg rule: Beware of executives who write self-help books.
Herb Greenberg writes daily for TheStreet.com. In keeping with the editorial policy of TSC, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnerships. He welcomes your feedback at email@example.com. Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.