Precision Auto Care Inc. executives plan to spend the next few weeks looking for ways out of a financial crisis, a process that could end with the outright sale of the Leesburg company.
Last week, Chief Executive Charles L. Dunlap negotiated a two-week extension on $8.5 million in debt that came due Sept. 30 and will seek a further extension to give the company time to raise cash. A rapidly changing automobile "after-care" market, coupled with millions of dollars lost on a troublesome expansion, left the company without the cash flow necessary to fund its operations.
Now it is in talks with several companies to secure a cash infusion or to sell all or parts of the company, Dunlap said last week. He expects to have a restructuring plan completed by the end of the month.
According to one industry observer, Precision's predicament is a classic case of a company trying to outgrow its problems.
"A number of companies have convinced themselves the way to survive is through acquisition and have been given a lot of encouragement from the investment community," said Edward Kaufman, whose New Jersey-based firm, Lindsey-Kaufman Co., tracks the industry.
But now, Precision is in the process of divesting itself of many of the seven acquisitions it made last year.
Precision employs 40 people at its headquarters in Leesburg. It also maintains an auto parts distribution center in Winchester. Last fall, the company laid off 10 percent of its work force, including 26 people in Leesburg.
However, Dunlap said, there will be no more layoffs here. In fact, he said, the company is "in the process of adding and filling positions as we're coming out of this restructuring."
Precision moved its headquarters to two separate buildings in Sterling from Beaumont, Tex., in 1987 when a group of local investors purchased the company. The company moved to Leesburg four years later, having found inexpensive quarters that could fit the entire company.
The Leesburg facility has grown into a center for research and development, said John Wiegand, vice president of Precision Tune's franchise operations. There, mechanics such as Joel Burrows--who also hosts car-related talk shows on local radio stations--develop new ways to keep cars running smoothly.
"I call [Burrows] MacGyver," said Wiegand, who joined the company in 1989. "He can fix a brake rotor with a stick of gum."
Of course, these days the car care market requires much more technological sophistication than a stick of Big Red can provide.
"The diagnostics side of the business has certainly changed," Wiegand said. "Today's technician . . . is an electrical and computer expert."
Precision, founded in 1976 as Precision Tune, has had to adjust not only to changing car repair, but to cars that need less of it.
"Today, they say you can go 100,000 miles without a tuneup . . . so we're also facing extended service intervals," Wiegand said, although for his part he considers the 100,000-mile tuneup a myth and thinks cars should check in sooner.
Customers, too, have changed, demanding more specific information from their mechanics. Over the past decade, consumers have been increasingly activist about repair shops selling customers unnecessary parts--and the industry has responded by setting standards. The Washington-based Motorist Assurance Program, of which Precision is a member, was formed in 1992 to help clean up the industry's image.
One common experience with mechanics that the program has attempted to stop is the old, "In doing an oil change, we noticed that, boy, your belt's very bad," Wiegand said, referring to a scare tactic once common in the industry.
Today, Precision gives guidelines to its franchisees requiring them to give customers "just the facts," Wiegand said. For example, a mechanic would have to tell the customer in the example both which belt it is and exactly what is wrong with it.
Despite the company's challenges--management turnover among them, Dunlap being the fourth CEO in 10 years--Precision executives think the company can get back on track even if it is sold, Dunlap said last week.
Wiegand said he thinks the company can survive its past mistakes. But there is one he truly regrets: There are no Precision franchises in Loudoun.
Five years ago, the company had one on Catoctin Circle in Leesburg, but it could not generate enough business and closed. Wiegand, a Leesburg resident, said that with the way Loudoun is growing, "boy, we sure would love to have that space back."