The DNA of SRC

The strands of partnerships sit at the organizational core of Springfield-based SRC Holdings Corp.

In 1983, a dozen partners who were looking to save their jobs founded the remanufacturing company, and its remarkable history is centered on dozens of collaborations created through the years. CEO Jack Stack spearheaded an employee buyout of the closing International Harvester plant some 30 years ago, and his instincts to join forces with others for mutual benefit haven’t changed.

In September, the company will formally launch Ceramex North America LLC, a 50-50 partnership between SRC Holdings and United Kingdom-based Hexadex Ltd., making it the 35th company under the SRC banner.

“A partnership means so many different things. For instance, we have an automotive factory where we have a partnership with General Motors because General Motors provided the tooling (for) its engines. We also have equity partnerships where two people put skin in the game,” Stack said, adding SRC has started or participated in at least 67 companies.

Throughout the years, SRC has sold 14 of its ventures, closed 10 and folded seven into other SRC brands. Current partnerships include agreements with Case New Holland for CNH Reman LLC, John Deere Co. for John Deere Reman and General Motors Co. via SRC Automotive Inc.

Ceramex’s starting line
Company officials are preparing office space at Missouri State University’s downtown business incubator, The eFactory, for Ceramex North America’s formal launch.

SRC Holdings Executive Vice President Scott Dalenberg said The eFactory allows administrators to work with nearby scientists at MSU’s Jordan Valley Innovation Center. Their key role: to research ways of reducing oil-based deposits that build up on the diesel emissions filters Ceramex will remanufacture.

“We’ve been involved with cleaning emissions’ after-treatment systems for a little over five years,” Dalenberg said of SRC’s labor-intensive process.

For its efforts, he said SRC has air-purged the systems, baked them and then tested them – a cleaning process that can take up to 36 hours.

“We saw very poor yields. A lot of units were difficult to clean,” Dalenberg said.

That’s where Ceramex, a division of U.K.-based Hexadex, comes into the picture.

“They’ve been a leading exhaust and emissions company in the U.K. for 30 years. So, we started talking with them several years ago about their technology and what they’re trying to do to put a global footprint together,” Dalenberg said.

“What was really synergistic about it was they dealt with a lot of the same OEMs, original equipment manufacturers, in Europe that we dealt with here in North America.”

He said Ceramex’s water-cleaning process was so good, SRC pulled the trigger to create a division serving North America from Springfield.

“The real key to the Ceramex system was it gave us a 50 percent higher yield on the product,” Dalenberg said, noting the cleaning process is now under three minutes. “The efficiency of this new process was just very compelling.”

Stack said SRC and Hexadex are planning to invest roughly $1 million each to launch Ceramex North America.

The filters have on-highway diesel vehicle applications, as well as off-highway applications for the construction, mining and agricultural industries, Dalenberg said.

SRC has been remanufacturing the systems at a facility in Monett for three years, he said, and that building will remain a key in Ceramex’s operations. The company is taking up a suite of four offices at The eFactory.

“We get some units in that are heavily oil-soaked and are difficult to clean. We are engaging Allen’s team to come up with solutions to remove these different toxics and coatings that come in on these filters, so we can clean and reprocess those into a remanufactured product,” Dalenberg said.

Stack attack
Job creation has been a major driver of SRC’s partnerships since the company was formed, according to Stack.

“We never lost the idea that job creation was No. 1. We wanted to be able to bring more jobs into Springfield, Missouri, in the hopes that one day our kids could have good jobs,” Stack said. “Where we were really lucky was we fell into this culture of transparency, a culture related to open-book management. Our system is called the Great Game. And our culture became attractive to a lot of companies.

“Some companies then came in to Springfield to taste the Kool-Aid and see what our company was really like. We thought, ‘Maybe, we have something here. Maybe what we have is the ability to not only create jobs internally, but also to bring Fortune 500 companies to Springfield.’”

Under the SRC umbrella is Stack’s Great Game of Business division, born in 1993 from the CEO’s bestseller by the same name. The book, which teaches growth through open-book management, has sold roughly 300,000 copies and has been printed in 13 languages.

Over the years, SRC has diversified with entities focused on everything from logistics, packaging and distribution to failure analysis and reverse engineering.

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 in 2008 to John Deere Co., which then created John Deere Reman.

Twice a year, Stack said ideas are explored from SRC’s roughly 1,200 employees, who have to back up ideas for partnerships or new ventures with a written business plan. Action is taken based on what can sustain or generate the most money and jobs.

Beyond internal ventures, Stack said SRC has taken a $400,000 equity position in a mobile electronic medical records startup by urologist and entrepreneur Dr. Howard Follis.

The formula continues to pay dividends.

Last year, SRC companies generated $545 million, a 21 percent increase from 2012 revenue.

Stack said the companies are on pace to produce $630 million in 2014 sales.

Of course, not all partnership discussions work out as conceived.

Stack said SRC had been exploring a partnership this year with Titan Machinery, an oil and gas company working in North Dakota, but opted instead to just enter a supply agreement on its newly developed diesel engines that convert to gas.

“With one to two huge diesel engines converted to natural gas, they can use the natural gas on the site to create the electricity for the oil wells,” Stack said. “It’s a hot commodity.

“But we left last week and decided that we’d do the manufacturing side, and Titan would handle the service side.”

The efforts in North Dakota, however, led to the development of another company: SRC Power Systems Test Center, which ensures engines meet environmental emission standards. The 34th company under SRC officially launched in North Dakota on July 21.

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SRC Holdings Corp. has had a hand in starting 67 companies, many of which were partnerships, since the company was formed via 12 individuals in 1983.[[In-content Ad]]