Anti-Succession: How Linamar engineered a smooth and successful CEO handover

No backs got stabbed, that’s the first thing. Nobody screamed or tearfully pleaded. And there was no frantic last-minute, boardroom-adjacent wrestling match. Maybe that’s a tiny bit surprising for some, given how thoroughly the hit HBO show Succession—not to mention certain real-life examples (hello, Rogers)—managed to bundle the idea of leadership transition in a family business with the expectation of chaos, rivalry and betrayal.

But at Linamar Corp., one of Canada’s biggest family-controlled industrial manufacturers, the title of CEO has changed hands twice in the company’s 58-year history. From founder Frank Hasenfratz to his daughter Linda in 2002. From Linda Hasenfratz to Jim Jarrell just this past August, at a particularly stressful time, as you’ll see. And in each case, you saw no headlines, no drama—just happy shrugs all around.

We’re here to understand why.

“Let me tell you about me being announced CEO,” says Hasenfratz. “So—”

No, hold on. First, we need to flesh out the picture a bit for people who don’t know much about Linamar. Which, let’s be honest, is most people. Family companies that don’t dabble in sports teams or political influence and just get on with the business of making things tend not to get a lot of attention.

There are basic facts to know: That Linamar makes and designs engineered parts for companies in four sectors: mobility (automotive chassis and power train components), agriculture (farming equipment like combine headers and fertilizer applicators), industrial (Skyjack scissor, boom and telehandler lifts), and medtech. That it’s based in Guelph, Ont., but employs more than 35,000 people in 75 manufacturing plants and 17 research centres in 19 countries on four continents. That it has a nearly $4-billion market cap and recently hit the milestone of $10 billion in annual sales.

We need to know, too, that this leadership succession comes as Linamar is facing a couple of existential challenges, through really no fault of its own. The first has to do with the auto industry—with what the company calls its mobility segment accounting for nearly a 70% chunk of its business. These aren’t normal times in car and truck land. Supply chains that were recovering from the tribulations of the global pandemic are being tested again by the EV transition, a lurching hurry-up-and-slow-down period of change and adaptation that’s forcing an industry to add the capacity to build millions of cars that no one is sure the world wants or can afford. Says Jim Jarrell: “It’s the most complex time in the automotive industry I’ve ever been in.”

The second challenge sits closer to home. It has to do with why the leadership of a family-controlled company is passing to a non-family member for the first time.

Linda Hasenfratz has four children, all in their 20s. None of them are involved in the business in any way, although the eldest, Katie, is in the midst of her MBA at Harvard. Could she one day be in a position to take over? Fingers at Linamar are crossed. Jarrell, meanwhile, is 61. How long will he be there? “Everybody asks me that question,” he says.

Yes, well. These are things we need to look at.

But so far, at least, Linamar’s successions have been uniquely intrigue-free, and there are reasons for that. Let’s start with just a bit of history. Frank Hasenfratz—Linda’s dad—was a refugee of the Hungarian revolution who arrived in Canada in 1957 and started machining auto parts in his basement in 1964. Bruce Murray, veteran head of the Murray Wealth Group, remembers when his father was a purchasing manager for a truck builder in Paris, Ont. One of their suppliers went on strike, and they needed somebody to make a flywheel, fast. “My dad said, ‘I heard about this little guy up in Guelph who could do it. He’s gonna come in and see me at five o’clock tonight.’” That was Frank. “The next day at 8 a.m.,” Murray says, “Frank was waiting with the flywheel in his car outside my dad’s office, and it was perfect.”

Frank had a wife, Margaret, and two young daughters, Nancy and a baby named Linda. When he formed Linamar Machine Ltd. in 1966, he named the company after them.

Let’s jump forward 24 years. By 1990, Linamar was a publicly traded company with 13 machining and assembly plants and $129 million in annual sales. Linda was a young woman with a degree in chemistry and the beginnings of a career in the pharmaceutical industry. Her parents were away on holiday when she called to tell them she had important news, but she wouldn’t tell them over the phone.

Twelve years later—when Linda was only 36, with four kids under the age of six—she replaced her father as CEO of a company that now operated 27 plants in Canada, the U.S., Mexico and Europe, and had $1.2 billion in sales. And everybody in the company, as well as shareholders, essentially went, Yup, that makes sense. It was such a non-event that—okay, go ahead, Linda. Tell us about the announcement.

“So, it was to happen at our annual meeting,” she says. “My dad was to do his presentation, and then I was coming up.” By then, Linda was president. “And he was supposed to announce me being made CEO.” But he didn’t. Uh-oh. Intrigue? Well, no. “He came off the stage, and I was like, ‘Dad, you were supposed to announce that I’m being made CEO.’ And he’s like, ‘Oh, I forgot. You just do it.’” So I went up, and I said, “Well, first order of business, I’d like to inform you all that I’ve been made CEO.”

And the crowd’s reaction?

“I think they laughed, that I had to announce my own promotion.”

When Linda became CEO, her father took on the title of chair. But he didn’t stop working. There was a funny moment, some time after Frank became chairman, when CTO Mark Stoddart was hosting an investor’s lunch at CIBC and someone casually asked, “So, what’s Frank up to now?” Stoddart replied that he was at the office.

“What do you mean?”

“He comes to work every day,” said Stoddart.

Everyone stopped eating, forks suspended between their plates and their mouths. They’d assumed he’d be out golfing or travelling. That was when Stoddart realized they should have made Frank’s title executive chair.

But when Linda accepted her promotion, she knew full well her father wouldn’t stop working, so she had made sure to establish some boundaries.

“I think I had him on an airplane,” she remembers, “so I had him captive for a period of time. And we agreed on the four things that he was gonna do, and I wrote it down on a piece of paper. Because my dad always said, ‘If you make a deal, get someone to sign it right away.’ So, I wrote the four things down, and we both signed that piece of paper.”

According to that piece of paper, Frank would approve capital expenditures, because nobody could do it better; he would lead the CAT—Cost Attack Team—program (more on this later); he would handle associated duties like auditing the corporate paper trail; and he would act as chair. What wouldn’t he do? “Anything not on the list,” says Hasenfratz.

Now, 22 years later, it’s happened again. In early August, she handed the keys to the family company to Jim Jarrell. Why now? After all, Hasenfratz is only 58. It has to do with goals. She’s a big believer in setting big, bold ones. “They force you to think differently in a way that small goals don’t,” she says. “I think with bold goals, you achieve big things. Small goals, you achieve small things.”

Some years back, not long after she’d become CEO, when Linamar had about $1.8 billion in annual sales, the company established a big goal of hitting $10 billion in sales by 2020. Because of the financial crisis of ‘08-09 and the 2020 pandemic, it took until 2024. But once it had been done, Hasenfratz knew it was time to give the top job to Jarrell. They discussed what she would and would not be doing as executive chair, a list that hews pretty closely to the one Frank agreed to. And the reaction inside and outside the company was, again, Yup, that makes sense.

Obviously it’s not the nature of the business itself that sees rare and momentous changes in leadership occur without quarrel or consternation. There’s another major parts manufacturer you may have heard of—Magna International—whose leadership controversies involving its own founding Frank and his ambitious daughter produced countless headlines (on top of the many more recent headlines generated by Frank Stronach’s rape, assault and forcible confinement charges). But the Stronachs are not the Hasenfratzes, and Magna is not Linamar.

“I think you need to figure out a way to set succession up for success,” says Hasenfratz. “A sign of a successful leader is that the people who come behind them are more successful than they are. I don’t think every leader thinks that way. I was really lucky that my dad thought that way. He wanted me to be a success.”

Frank Hasenfratz built his company one product, one line, one plant at a time. He figured that was the best way for his daughter to move up. On her first day, Frank handed her over to the manager of the company’s Hastech plant, which made various automotive components; he had her start at a lathe, machining steering knuckles. It was July, hot, she crashed the machine once or twice. When she got the hang of it, days or weeks later, she moved to a milling machine, then one or two others.

The point was to get a sense of the operation and the demands of the work. (Try, for a moment, to imagine a young Belinda Stronach, who was placed on Magna’s board of directors at the age of 23, sweating it out in an assembly plant.)

After a few months, she moved to the quality lab, learned about measuring, then shifted to engineering and worked on CAD drawings. Every time she moved to a different location, the “owner’s daughter” had to prove herself to a new group of people. She found that challenging. But after two years, Frank decided she was ready to manage and made her the materials manager for a newly established facility in Guelph.

Soon she was the operations manager at the Comtech plant, working for Jarrell, who was then a GM. Then she was manager of a plant, then two plants, then three. With an eye to the future, and pregnant with her first child, she started working on her MBA. At that point, in 1997, Frank told her he wanted to make her Linamar’s COO.

“I thought it was a fantastic idea,” she says. “I was excited about it.” But the market wasn’t thrilled, and the share price initially suffered. “I think it took the market by surprise,” says Hasenfratz. “I was just a general manager running a few plants, and all of a sudden I’m chief operating officer.” She sighs. “So, there I was again, back to having to prove myself, just like I did every time I moved plants or jobs.”

There were some observers who weren’t bothered by the decision. Bruce Murray, who has invested a lot of client money in Linamar over the years, knew enough about Linda to argue on her behalf. “People were criticizing,” he says. “My line was, ‘She’s taking an MBA, she’s pregnant and she’s running a factory. Feel free to criticize her if you can do two of those things.’”

But even Hasenfratz admits she wasn’t quite ready. Suddenly she had 17 monthly reports coming at her, a confusion of forms and numbers that had developed over decades. Her father, and long-time president Larry Pearson, each had an intimate understanding of what every machine in every plant did. Their knowledge of all the associated costs and profit margins, the returns on investment, had grown incrementally, and as a way of operating it worked fine for them. But not for Hasenfratz.

“I literally couldn’t get a handle on what was going on in these 17 plants,” she says. “I needed to have some kind of system for how people were going to report to me, so I could work quickly and easily, read these reports, and understand what the issues were.” Simply to survive, she changed the way the company operated. She imposed order on the disarray.

Suddenly every plant had to make their reports conform to a common template. The company developed a new quotation system and formed a financial review board to assess the potential of new business and M&A prospects.

Was there grumbling? Sure. People had always just gone to Frank to get things done. But Linda was more comfortable working with data than her father had ever been, and as information began to flow in a more orderly way, she was able to start collecting and using that data to help drive returns. Almost by accident, she’d created a framework for the company to grow.

An easy example is cost control, which is one of the chief ways Linamar wins new business. As a parts supplier, it competes not against other parts suppliers but against the original equipment manufacturers. “It’s make versus buy,” says Mark Stoddart. “The OEM is either going to make it in-house or they’re going to buy it outside. So we’re competing against them.” If Linamar can make an axle or a transmission casing or anything else cheaply enough that they can sell it to the OEM for less money than it costs the OEM to make the part itself, they win the contract.

Once Linamar wins a contract, it gets re-upped every five years, unless someone says they can do it for even less. But good luck with that, because in the five-year life of a contract, Linamar works to further improve the process, squeezing out even more cost. “We’ve never lost a contract,” says Stoddart.

The Cost Attack Team that Frank Hasenfratz took on when he became chair is a constant, relentless program of analysis and review, touching every department and every program, focused on driving out cost. Now that Linda is executive chair, the CAT is her baby.

Usually, three times a week, she and her team meet with plant reps to review a specific program and spend hours looking for ways to pare costs. Under her, the CAT has become highly data focused. By looking at energy use, for example, they discovered that some plants left their equipment in standby mode over the weekend. Others took their machines to emergency-stop mode, others to zero power. Some larger pieces of equipment, even in e-stop mode, were drawing 10 kilowatts an hour. At 12 cents a kilowatt hour, times 48 hours per weekend, times 52 weeks per year, that was nearly $3,000 per machine. With 35 of those machines in a plant, that meant $100,000 in savings. Now multiply that by 75 plants around the world. That’s the kind of result that can come from one CAT meeting, and Linda runs roughly 150 of those a year.

An arguably even more important aspect of the CAT program is its contribution to culture. “It’s about teaching,” says Linda. “Teaching people how to think, how to look at something from a different perspective. Tracking is a key part of our culture. My dad used to always say, ‘You can’t manage what you don’t measure.’”

Another big part of Linamar’s culture—again established by Frank—is responsiveness. The ethos is, Do it now. If someone in a CAT review is asked how much they’re paying for a filter, and they don’t know? They’re expected to go find out. Says Hasenfratz, “We never say, ‘Come back later and tell me.’ Never.”

Culture is something Jim Jarrell holds dear. Thinking of Frank, who died in 2022, Jarrell knew it was important to the founder that Linamar keep alive its original entrepreneurial spirit. “We had several conversations about that before he passed away,” he says.

Tall and equipped with a voice fit for the bass section of a choir, Jarrell came to Linamar in 1991 from Magna (with a short stop at a company of his own, Ultramet, in between). Though he wasn’t a Hasenfratz, he still had family connections. His wife was an executive assistant at Linamar’s headquarters when he arrived, and shortly after that, his father, who had been a group vice-president at GM, joined Linamar’s board. Starting in sales and marketing before shifting to operations, Jarrell brought from Magna an appreciation for its willingness to give people a shot. At Magna, he says, “responsibility lies all over the floor. You pick it up? It’s yours to go. I always thought that was really cool.”

He also had a memory of the moment he was introduced to Frank Stronach, shortly after he’d started. “Hey Joe,” said Stronach, not catching Jarrell’s name, “Just don’t screw up the customers, the employees and the shareholders. See ya!” And he walked away.

Though the meeting lasted only seconds, says Jarrell, “what has resonated my whole life is those three things: Take care of the customers, the employees and the shareholders.” A few years after he arrived at Linamar, he decided to pilot a performance-measurement program at several of the plants he managed that would consider those three elements equally. Jarrell called it the Stepping Stool: “You need to balance your decision-making, balance your strategy, balance your teamwork all around these three legs.” Before he could implement the program at the rest of his plants, Linda Hasenfratz, by then CEO, promoted Jarrell to COO and took the Stepping Stool competition company-wide. Now Linamar plants around the world proudly hang the green Stepping Stool banners they’ve won, and employee bonuses are tied to their performance.

By the late 1990s, Jarrell had already established himself as vital to the cause when Linamar was launching its operation in Mexico and found itself in crisis. Local leadership of the operation, which was to supply parts to GM, inexplicably agreed to start up six months ahead of schedule, without the necessary infrastructure in place. Jarrell took the lead on managing Linamar de México through the debacle, which saw him roaming around the city of Ramos Arizpe on the back of a pickup, calling out for workers through a bullhorn.

It’s that reliability in a crisis, along with his outsized influence on company culture and his abilities as a negotiator—he has largely led Linamar’s recent M&A activity as it has built out its offerings in its ag and medtech segments—that explains why Jarrell became such an integral part of Linamar leadership. It explains why as many as 15 years ago, Frank Hasenfratz started casually mentioning that, one day, Jarrell could be CEO.

Today Jarrell has two documents he holds close. One is a letter from his own father when he was on Linamar’s board, that predicted a career path for his son that would lead to a CEO’s job. The other piece of paper Jarrell treasures is a printout of an email from Frank not long before he died that made the founder’s respect and affection clear. For the past several years—in accord with Frank and Linda’s belief in setting a successor up for success—Jarrell has quietly been taking on more and more of the CEO’s role.

“He’s basically been working his way into the job, just like I did, over the past five years,” says Hasenfratz, “to the point where he was basically doing the job when we made the announcement.”

As CEO, Jarrell now faces some tests. The lack of performance from Linamar’s share price is an ongoing frustration. “I don’t have any magic wand for that,” he says. But he knows the company must get better at communicating what it does. “We get lumped in with all the automotive companies. That’s sort of how we’re perceived.” No matter how much Linamar tries to communicate that it’s diversified across several verticals, people seem not to get it. The hope is that as Linamar diversifies further—having identified power and water as two more verticals with potential—the company will be less hitched to the cycles of the automotive sector.

But before then, they have to make it through the current tumult in that industry, as it struggles to recalibrate its investments and expectations around electric vehicles. Linamar’s customers—Ford, GM, Stellantis and others—are hurting. “They’re having so much difficulty with this transition to battery electric vehicle,” says Stoddart. “They’re losing billions of dollars on it.”

“Everybody went too far, too fast,” says Jarrell, “and now everybody’s going, ‘We gotta pull back, we gotta pull back.’ Which has created a massive amount of strain in the market.”

Carlos Tavares, the CEO of Stellantis, has said the North American industry has to make EVs as affordable as gas-fuelled vehicles, to compete with its Chinese competition. “This will place a big, big burden on our suppliers,” he said at a conference in May, “and if they cannot contribute for any reason in this cost-cutting, then they are going to be in trouble.”

Linamar’s cost-cutting code gives it a fighting chance, but it won’t be easy.

And then there’s the matter of Jarrell’s future. At 61, he knows his job isn’t to point Linamar in some bold new direction. “My job, really, as a steward of this company, is to make sure we keep the culture, grow and develop the people,” he says. “That’s gotta be my role.”

As for preparing for the not terribly far-off moment when Jarrell will need a successor, board member Lisa Forwell will not even entertain that question. “I think what’s really important here is that we’re just celebrating the fact that he’s just taken the position,” she says.

You’re not thinking about the next step at all?

“I didn’t say I’m not thinking about it. But right now, we’re enjoying this.”

Hasenfratz is definitely thinking about it. She already knows that if one of her children wants to come in, she’ll have them start on the shop floor and prove themselves capable and willing at each level, just as she did. “I’m not making them a commitment that they’re gonna be CEO one day, but we can certainly aspire toward that.”

How would it feel should the day come when she needs to step down from her role as executive chair and there isn’t a Hasenfratz in place? “Obviously that wouldn’t feel great,” she admits. But it’s not a worry just yet. “I think I’m young enough to be able to continue doing this for a long time,” she says. “Hopefully long enough that I can bridge those future transitions.”

And she is not, for the record, dissuaded by her father’s perception that almost all third-generation leaders fail. “If you want statistics to be meaningless,” she says, “then look at them in the aggregate.” Just because the majority fail, does that mean all of them will?

Intriguing.

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