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It's not easy climbing out of a hole. But once you've hit bottom, getting back on top becomes that much sweeter.

That's the viewpoint these days at Conseco Inc., the Indianapolis-based parent of pool and spa loan underwriter Conseco Finance Corp.

Conseco Inc.'s reinvention--launched shortly after Gary Wendt became chairperson and chief executive officer in June 2000--isn't finished. But it has come a long way, according to company officials.

That's good news for pool and spa professionals because Conseco is a leading provider of financing programs for the pool and spa consumer. It's also a positive sign for the industry that no matter how rough the waters may get for your company, there is always a chance to improve matters--as long as you plan your resurrection carefully.

In Conseco's case, the Home Improvement Division solidified itself as a strong performer in uncertain economic times, says Jeff Surratt, division senior vice president. While the company as a whole rebuilt itself by paring down to essential business components, the home improvement sector looked ahead and introduced or improved a handful of products designed to capture or recapture market share, Surratt says.

"Through everything that's happened, our unit has stayed very focused, very profitable," he says. "In light of all the circumstances, we may well have had one of our best years."

That's exactly the action you should take when you're trying to rebuild a troubled company, according to Dr. Daniel Keeler, a retired business professor from the University of California-Berkeley Haas School of Business in Berkeley, Calif. "When you're on the ropes, you can either hit the canvas or come out swinging," Keeler says. "If you want people to forget your past, give them something else to talk about."

Time travelling

In early 2000, Conseco Inc.'s name was all over the news, but for all the wrong reasons. As chronicled in publications such as the Wall Street Journal, Fortune and Business Week, the once-successful insurance and finance firm had become a beleaguered unit with rising debt, diminishing stock prices and nervous investors. Stephen Hilbert, company founder and then-CEO, had "spent recklessly and pushed for growth at all costs," according to Business Week. These actions ultimately led to Hilbert announcing at the end of first quarter 2000 that he wanted to sell the company's finance unit.

"The market did not respond favorably to that," Surratt recalls. "I think he thought it would solve a lot of the problems. We went through the second quarter [of 2000] with that [potential sale] hanging over our heads."

By June 2000, Hilbert resigned and Conseco shareholders lured Wendt out of retirement to revitalize the company. Wendt, who had helped turn Conseco competitor GE Capital into a $41-billion company before bowing out in 1999, told Business Week that what he saw from his initial survey of Conseco surprised him: "I just didn't believe that it could be in that bad a state."

One of Wendt's first moves, according to published reports, was to put the finance division--and investors--at ease with three words: No fire sales. "We were instantly taken off the market," Surratt says.

Investors and employees breathed a lot easier; the company's stock rose 24 percent within a week of the announcement, according to New York Stock Exchange records.

It's a classic move, says Keeler. "There's often a lot of uncertainty among employees when they're hearing about their company's problems, especially when they hear about it secondhand, such as from the media," Keeler says. "The best thing you can do is play it straight. If you're going to lay people off, tell them. If everyone's got a desk to come back to tomorrow, make sure they know."

Since assuming office, Wendt has issued monthly "Turnaround" memos that keep the company and anyone else interested in Conseco's performance apprised of changes. "The memos are very straight-forward, very candid, just like [Gary Wendt's] personality," Surratt says. "With him, what you see is what you get. There are a lot of stories about how difficult he can be when he challenges you to get it done. But he just wants performance."

Dropping weight, gaining ground

Wendt's next move was to restructure the company, dropping pieces that no longer fit in the corporate puzzle. Conseco Inc. kept four main divisions: home improvement, manufactured housing/mobile home, consumer/retail finance and a home equity channel.

"We had gotten into too many areas--so many that we had trouble maintaining our leadership position in the core businesses that had originally made us successful," Surratt says.

Conseco sold off various entities, such as truck financing and sub-prime Mastercard and Visa units, and outside investments such as a riverboat gaming casino. "Those types of things were not helping the ongoing operations of the company," Surratt explains. "Now that we're focusing on the finance company, [Conseco as a whole] is getting back into the swing again."

Conseco's biggest swing is in its dealer-driven segments, namely, consumer/retail, manufactured housing and home improvement, Surratt says. All three rely on retailers' ability to promote Conseco products, which means the company needed to spruce up its offerings--even the successful ones, according to Surratt.

"We've focused on a philosophy of offering our complete array of products to those [dealers] who have shown loyalty to us over time," Surratt says. "We want to be a total financial solution for our customers, and we want the dealers to view us accordingly. We don't want to partner with a guy who uses a bank for all the good stuff and sends us everything else. If we can be a total bundle of value, in the end we're going to win."

Keeler says the key here is to offer something a customer and, in this case, also a dealer, can't turn away from. "There's a three-letter word for this type of product: n-e-w," Keeler says. "It doesn't have to be never-before-seen, but people should believe it's worth their time to look at."

In the past nine months, Conseco gave dealers a lot to look at. In the middle of first quarter 2001, Conseco Finance unveiled its 100 LTV ("Loan-to-Value") product, a lower-rate secured $7,500 to $50,000 loan program for inground pools and spas. And in late May, the division began offering a subprime loan program for applicants with less-than-perfect credit, according to Surratt.

These two programs helped expand Conseco's market by giving dealers more to offer their customers, Surratt notes. "We really believe that there's not a customer we shouldn't be able to handle," he says.

Reaction to these programs has been good, says Surratt. "The [lower-rate] 100 LTV product was an important one to us because, quite frankly, our rates had been a little out of whack to reach the better credit customers," he says. "You can't be a total solution [to a dealer] without the best-quality customer."

The sub-prime program is just starting to take hold in the pool arena, Surratt says. With the economy's recent downward shift, the popularity of such a loan deal might rise with retailers. "You'll find a lot of swimming pool and spa dealers who think they don't have sub-prime customers and, generally, there aren't a lot just by nature of the product," Surratt says. "But they are out there. My theory is that if we can help a dealer pickup one more loan out of 10, the profitability of that additional pickup is going to be huge for them and us."

Playing the veterans

A key step in reforming a company is recognizing that not everything needs to be repaired. "Sometimes executives get in there and commit wholesale slaughter in hopes of fixing everything that's wrong," Keeler says. "They don't want to miss a problem, so they completely rewrite the book. But some things don't have to change. As the saying goes, 'If it ain't broke, don't fix it.'"

Conseco kept two of its successful veteran programs intact and hopes they will help lead the company in 2002. One is its AquaVantage card, an unsecured revolving charge card that offers consumers credit lines up to $20,000, according to Surratt. Since 1998, the card's popularity has tripled because it gives small dealers the ability to offer a financing tool usually only available from the "big" guys, Surratt says.

On the other end of the spectrum is Conseco's private-label credit card program. In this arrangement, a larger company (roughly $40 million or more in annual sales) can put its name on a credit card and offer the card to customers as its own, says Surratt.

"The bottom line here is that you've got to be able to satisfy the dealers--all of them," he says. "We can certainly put together a very large private-label program. But you also need to reach out to the $3 million dealer."