Terex, famous for their mini diggers for sale, come out of the recession under CFO's auspices

In 2002, Phillip Widman accepted the role of Chief Financial Officer at Terex Corp., the construction equipment manufacturer who are well known for their brand of mini diggers for sale. The company was undergoing a period of rapid expansion, and marshalling this was one of Widman's key responsibilities, and also one his most challenging. Terex, who aside from mini diggers also manufacture a range of heavy equipment and cranes, were, at that time, ploughing through acquisitions, with 11 company purchases taking place between 2002 and 2007. In the same time period, operating profit increased 12-fold and sales increased by 300 percent. However, 2008 saw the global economic recession hit, and Terex, like many companies, suffered greatly, with orders vanishing into thin air, and sales for all product lines dropping by huge margins, sometimes by up to 80 percent. Or, as Widman succinctly put it, during an interview at the firm's Connecticut headquarters, We hit the wall.The recession bit so virulently, that by the beginning of 2009 Terex was haemorrhaging money. Widman was forced, like hundreds of others like him across the world, to confront the fact that they were now operating in an entirely different economic reality. As a result, his job became focussed upon devising cost cutting measures, in order to stabilise the company's finances. As Widman commented, You take all the actions you need to do to stop the bleeding.
This involved making tough decisions, and Terex were forced to close or merge many of their manufacturing plants, cut the hours of work that members of staff undertook at the factories, and freeze much of their spending. Widman said, You’re down to cutting at the bone sometimes. You’ve just got to be very careful about going too far.

Other measures included laying off 30 percent of the work force, and instituting a 10 percent salary cut for all remaining employees, right up to corporate management.

2009 continued to go badly for Terex, with their falling sales putting them at a real risk of violating certain conditions of their bank loans. Widman was forced to agree amendments with their creditors, which bought the company time from having to meet debt payments saying, We needed some escape valves.

In mid-2009, Widman and Ron DeFeo, the chief executive officer of Terex, made the decision to take advantage of the nascent recovery of the stock exchange, and sold stock and bonds worth $600 million, using the money to both pay back debts owed to the banks, and to give themselves the manoeuvrability of cash liquidity. Widman said, You do it when you can, as opposed to when it’s too late and you can’t get the money.

They then sold the arm of the company which makes mining equipment to Bucyrus International Inc. for $1.3 billion, comprised of $0.3 billion Bucyrus shares, and $1 billion in cash. The Bucyrus shares were given on condition that Terex would keep them for at least 12 months, so Widman purchased derivatives which were linked to a variety of shares in companies similar to Bucyrus, in order to ameliorate the risk of a drop in Bucyrus share prices. Widman said:

Their volatility is very high, so we had to look at how we could potentially hedge that risk.

Widman also decided to utilise bundles of derivatives to counter the risk of fluctuating exchange rates affecting foreign-generated revenue. Widman said:

We’re trying to maintain a buffer or a smoothing. I’m not going to take a position that’s really dramatic.

These measures saw Terex enter the middle of 2010 with significantly more cash available than had been the case one year earlier, with $1.5 billion available, and a further $500 million from a credit facility. This money, Widman says, could be used to begin a new campaign of acquisitions, We’re an acquisitive company, and if somebody else can’t survive, we could potentially take advantage of that. We don’t necessarily want to buy very troubled businesses, but good businesses in troubled situations.


As of the interview, no concrete target for an acquisition has been identified, with sellers, who are also still recovering from the debilitating effects of the recession, asking for too much money, with Widman saying, There are a lot of natural combinations that should occur, but the industry hasn’t consolidated very much.

However, Terex's fortunes are recovering, with sales rising once more, and this has allowed the working week at the factories to be re-extended, and salary cuts to be rectified, with Widman saying, We’re producing at a lot higher levels than last year.

The figures from 2009 saw Terex spending $100 million per month on materials, down from $300 million per month in the pre-recession days of 2008. 2010 has seen them rise back to a level of $200 million per month.

Widman predicts that Terex should be able to meet their target of posting a per share profit by the end of 2010, with $4.5 billion worth of sales for the year. He also said that 2013 should see Terex have doubled its revenue, without any new acquisitions. He said:

We think we can taste it, but it’s not going to be as easy as it might have been two or three years ago.

This is partially because Widman is targeting sales growth in new areas. The US and Europe are no longer the be-all and end-all of markets, with countries such as Brazil, China and India increasing in importance month by month. Widman said:

The developed parts of the world are not going to grow as much. In terms of where we see spending, certainly China’s at the top of the list for the next decade or two.

Consequently, Terex is working to significantly expand their operations throughout all three of those countries. Whilst potentially lucrative, there are a labyrinth of new challenges, involving local practices, laws and intellectual property legislation. Widman said:

We’ve made some mistakes.

An example is the sale of an excavator, designed in Germany, to a Chinese firm. In China, the vehicle was utilised virtually non-stop, 7 days a week, whilst it had been designed under the assumption that it would work for 40 hours per week, So you need a different ruggedness, concluded Widman.

Widman was born in Detroit, Michigan, and went on to achieve a Masters degree in Business Administration, awarded by Eastern Michigan University. He worked for Unisys Corp. for more than a decade, before moving to ABB Asea Brown Boveri Ltd, becoming the Chief Financial Officer. He then moved to Philip Services Corp. as Chief Financial Officer, and orchestrated the restructuring of their debt, saying, I liked it from an experience standpoint; it was hell going through. He accepted a position as Chief Financial Officer with Terex in 2002, consolidating the company during a period which, not only did the recession hit, but Terex's make-up was fractured and de-centralised. Widman said:

I had to build the whole finance organization. We didn’t have information technology; it was whatever the guys at the local businesses had.