SRC Holdings forms 33rd company

SRC Holdings Corp. CEO Jack Stack is still having fun. Stack said creating new businesses and watching them evolve has been one of his favorite things to do since he led an employee buyout to start Springfield ReManufacturing Corp. 30 years ago.

Now, Stack has a new one to watch: Global Recovery Corp.

On Feb. 1, SRC officially opened the doors to Global Recovery, which buys and sells surplus and obsolete materials as well as disassembled parts and scrap metal to customers such as Case New Holland, Navistar, General Motors and Komatsu.

The business license for Global Recovery Corp. took effect Jan. 15, and the 10-employee shop leases 136,000 square feet at 2065 E. Pythian St. behind the vacant Solo Cup plant, General Manager Neil Chambers said. Global Recovery is the 33rd business currently operating under the SRC Holdings banner. Systemwide, some 1,200 employees centered on remanufacturing products generated total  2012 sales of more than $440 million.

Global Recovery began functioning five years ago as the asset recovery department of SRC Logistics – another of the 33 SRC companies – to purchase and liquidate primarily surplus and out-dated materials obtained from the automotive, construction and mining industries, Chambers said. The company buys materials and parts from original equipment manufacturers – items such as transmissions, axels and pistons – with the idea that it can recover as much value as possible for its customers.

For instance, Chambers said an OEM might project to sell 100 fuel pumps but only move 50.

“We’ll go in and buy maybe 35 of the 50 and market those across the pond or down the road,” Chambers said. “If there is a market for it, we are interested.”

Chambers said Global Recovery signed a sublease with SRC Logistics, the SRC Holdings company that holds a long-term lease with an option to buy the Warren Davis Properties-owned facility. The building and land – roughly 17.6 acres – had a taxable appraised value last year of $4.5 million, according to Greene County assessor records.

Chambers said the company plans to hire two additional employees within 45 days.

“All of our ideas are generated from the associates,” said Stack, the author of “The Great Game of Business,” which spawned its own spin-off dubbed Great Game that teaches business owners how to include employees in company financials and revenue development.

During the years, 14 companies associated with SRC have been sold, 13 shut down and 17 consolidated.

Companies once under the SRC umbrella include The Bank and ReGen Technologies. After a merger with Signature Bank, The Signature Bank sold to BancorpSouth in 2007. ReGen Technologies sold to John Deere Co. in 2008, which then created John Deere Reman.

SRC also owns an interest in several companies such as CNH Reman, which is a partnership between Springfield Remanufacturing Corp. and Case New Holland formed in 2011.

Today, SRC holds a majority share in 18 companies, including the newly formed Global Recovery.

Stack said SRC Holdings startups follow three criteria: an ability to generate cash flow and absorb overhead, and have a diversification program in place within two years of formation.

“You can have the greatest idea in the world, but if you don’t have a customer, it’s only an idea,” Stack said. “Too many people start a business with great ideas and then they try to get the customers in line. We try to get the customers tied to the idea.”

Not having an appropriate amount of overhead for a company can kill startups, Stack said, which is why he requires those who present ideas to be thinking about required facilities and equipment.

“Too many times people raise capital and then invest that capital in nonvalue-added things, such as fancy offices and cars, and they are not really conscientious of their overhead required to run their business,” he said.

Stack said SRC leaders accept ideas for new businesses during two companywide annual meetings. Chambers, who had worked in the Global Recovery division for three years, called for the creation of a separate company in October, and the seven-member SRC Holdings board reviewed plans before voting last month to spin off the division into a stand-alone company.

Chambers said Global Recovery has a first-year sales goal of $8.2 million. Startup costs for the venture included $600,000 for materials, and transferring $1.2 million in assets from SRC Logistics.

“It was time to identify ourselves as what we’re going to be, get out from under that blanket and go,” Chambers said.

Stack said other than LKQ Dismantlers, which operates under Chicago-based LKQ Corp. (Nasdaq: LKQX), Global Recovery’s competition largely comprises salvage yards across the country.