|
|
|
The World is Their Oyster
Dynamic local manufacturers are pumping up sales and
winning new customers by building global muscle.
|
Business New Haven
1/7/2002
By: Nancy Barnes
|
Around 1710, in the English village of Coalbrookdale, a farmer's son named Abraham Darby produced a marketable iron in a coke-fired furnace. By using coke, he was able to fuel much larger furnaces than had been possible with charcoal. As a result of the cost-effectiveness of his production, the Industrial Revolution was born. And mass-manufacturing became a cornerstone of modern economies.
With 15 percent of its employment base still tied to manufacturing, Connecticut remains a manufacturing state, according to Don Klepper-Smith, chief economist and director of research at Scillia Dowling & Natarelli Advisors. Yet, the state's total number manufacturing jobs has dramatically declined. “As of October 2001, we had approximately 253,000 manufacturing jobs in the state,” Klepper-Smith says. “We've seen a steady erosion from the late 1960's when we had roughly 450,000 manufacturing jobs.”
Klepper-Smith points out that there has always been a diverse mix of manufacturing companies based in the state. Today many of them compete in the global marketplace.
140 Years of Specialty Metals
Among Connecticut's early industrialists who rose to national prominence was Anson G. Phelps, a Glastonbury native who made his fortune in New York before buying a share of a copper factory along the Naugatuck River. Thwarted by a land speculator, he moved what had become solely his operation two miles upstream. With the expansion of the product line into brass, the Ansonia Brass and Copper Company was founded in 1869.
Today, the company clings to its facilities in Ansonia, where it manufactures rods and flat wire, and Waterbury, where it manufactures tubing. It employs roughly 300 people. The company has survived acquisitions by and divestitures from businesses such as American Brass, Anaconda (today, Anamet) and the Atlantic Richfield Company (ARCO)-in addition to a flood that engulfed one of its Ansonia mills in 1956.
As an employee-owned manufacturer of high copper alloy products, it occupies a niche market. “We do about 60 alloys here. It's all a copper base,” says senior marketing executive Jeff Lawlor. “Our free-cutting brass is more of a commodity. We can still make it, but from a cost standpoint the pricing is so tough that it accounts for about three percent of sales.”
Lawlor says that the company manufactures its specialty metals for four industries-automotive, electrical, military and transportation. This diverse customer base balances sales, which he describes as stable. “Right now, the auto business is off, but our government military contracts are up,” Lawlor says.
“We are the only manufacturer of large-diameter seamless tubing in the country,” he says. He adds that all competition comes from offshore, primarily from KME and Le Bronze in Europe. The tubing to which he refers is cupro nickel, an alloy that is used in the submarines built for the government by New London's Electric Boat Company.
“There can be no mistake when you've got a vessel with a couple hundred guys,” says veteran employee Bill McNish, who adds that the outside diameter of the tubing runs as high as 14 or 15 inches. “It's stuff you can't find anywhere else. We're proud of that.”
McNish, who has been with the company for 40 years, says Ansonia Copper and Brass also produces the wire that provides electrical hook-ups for transit systems, such as the wires that are strung up in the tunnels leading into New York's Grand Central Station. McNish sells the same wire, which is copper strengthened by cadmium, to Korea for use in their communications systems.
Indeed, McNish says that export volume is down from the years when the company was owned by Anaconda and before Chile nationalized its copper mines in the 1960's. But he says it is up from 1989, when the company became employee-owned, and now stands at two percent of Ansonia's total sales.
“I am quoting Taiwan. I'm just now getting started quoting in mainland China,” he says of Ansonia's overseas sales. “It's very difficult to get into that market because of cheap labor.”
What makes these export deals possible for Ansonia is an alloy that cannot be produced in some countries. “You have to get into the market with alloys that cannot be produced in their countries,” McNish says. “Like cadmium copper.”
Advancing Filtration From Meriden to Shanghai
In a year that saw the sales of many companies diminish, Cuno, Inc., of Meriden fared especially well. In October, the business, which manufactures filtration products for the separation of liquids and gases, appeared on Forbes' list of the 200 best small companies in the country. For its fiscal year 2001 ending on Oct. 31, it achieved record sales, which rose one percent over the preceding year.
The company was founded in 1912 in Meriden by Charles Cuno, whose products were manufactured initially for automotive use. Among his inventions was the cigarette lighter for the car. In 1986, Cuno became the fluid purification division of Commercial Intertech. Ten years later, Cuno returned on its own as an independent, publicly traded company.
Today, it has 1,700 employees worldwide, among them 700 workers at its Meriden headquarters. Its competitors, such as Pall Corp., Millipore and U.S. Filter, are also headquartered in the United States, although their reach is global as well.
Cuno's products fall into three categories. They include products that purify drinking water for both residential and commercial use, products that meet the advanced filtration requirements of health care companies-such as medical test-equipment producers-and products that process fluids for industrial applications such as petroleum and paint.
In the last fiscal year, North America accounted for 58 percent of the company's sales, with the Asia/Pacific market accounting for 24 percent. Sales in Europe and Latin America accounted for the rest. The company has manufacturing facilities in France, Brazil, Japan, Australia and Singapore.
“We have local manufacturing in each of those regions,” says Cuno Chief Financial Officer Fred Flynn, who adds that the bulk of the company's manufacturing takes place in this country at its Connecticut and, much smaller, Indiana facilities. Flynn says that Cuno is starting a manufacturing capacity in China near Shanghai, which the company expects will become operational in the first half of 2002.
“It will initially serve to meet local product requirements in China,” says Flynn. Later, the company hopes the plant will serve other parts of the world as well.
“One important strength of Cuno in our international operations is that we have a very experienced management team in each country led by local management,” Flynn says. “In each country, we have local general managers experienced in local business practices, and that's a real advantage for a company of our size.”
Ready for a Chip Rebound
If the Industrial Revolution began with the bang of a large furnace, the high-tech revolution has its roots, in part, in what can only be termed a whimper. In the early 1960's, the federal government began to look into ways to maintain control over its nuclear armaments. In theory, the solution was a computer network that would enable the government to decentralize its armament command, so that more than one location could respond in the event of a nuclear attack. To put that theory into practice, the government turned to a consortium of universities, among them the University of California at Los Angeles (UCLA).
In 1969, a professor there tried to type the message LOGIN into a computer terminal, but the system crashed when he tried to type in the letter “G.” Nevertheless, the aborted message stands as one of the first communications on the Internet, and the term refers to an “inter-networking” between two computers.
The telecommunications industry, which until this year flourished as a result of what quickly became a commercial system of networks, relies on an information age kind of manufacturing, such as the system employed by Shelton's TranSwitch Corp. TranSwitch designs, develops and markets chips that serve as semiconductors for telecommunications networks. Roughly 80 percent of the corporation's employees are design engineers, according to company spokesperson Mary Lombardo.
She says their designs are sent in “take-out mode” to original equipment manufacturers, or OEM's, that operate overseas in countries like Taiwan. The chips come back to TranSwitch, where they are tested for quality control. TranSwitch then sells the chips to its customers, which include Lucent Technologies, Siemens, Marconi and Cisco. About half of TranSwitch's customers are overseas, and they are split between Europe and Asia.
“This whole industry is just acronym-driven,” says Lombardo, who notes that the company's competitors include PMC-Sierra, Inc. in Burnaby, Canada (PMCS) and Applied Micro Circuits Corp. (AMCC) in San Diego, Calif.
All of the semiconductor companies that supply networking chips have had a scorched-earth year. AMCC saw sales fall 70 percent in the June quarter from its high the previous December, and sales at TranSwitch plummeted 91 percent from its peak in December 2000. Sales continued to fall in the third quarter, and, according to Lombardo, were expected to remain flat in the fourth.
And analysts expect that sales by companies that supply semiconductor chips to the networking segment of the telecommunications industry will be among the last to recover. (Sales by chip makers that supply the cellular handset industry, for instance, seem to be rebounding, as are sales of PC's.)
Dr. Santanu Das, chairman, president and CEO of TranSwitch, says that the company should see some upward strength in the first quarter of 2002, but he acknowledges that his market segment will not see any normalcy return until the third or fourth quarter.
Das was among the founders of TranSwitch, which began operations in December of 1988. All of the company's founders worked for ITT's Corporate Development Center in Shelton before the laboratory closed in July of 1987. Although Das initially moved to Virginia, he returned to Shelton to join his friends in starting TranSwitch. “Because a lot of people who had worked with or for me [at ITT] were still in the area, it was very easy for us to put together a good engineering team,” Das says.
TranSwitch operates as a truly global concern. Although its world headquarters remain in Shelton, it has opened additional design centers both in the U.S. and in France, Switzerland, Belgium and India. Its customer support centers extend from Belgium to Taiwan, and many nationalities are represented among its employees.
“The initial team was located here,” says Das, “and this was where we expanded for the first three four years. Then, we found that the job market became very competitive, and it was very difficult to re-locate people from Boston or other areas to Connecticut. At that point we started opening engineering centers wherever we found a strong pull of talent. The reason we went to all these places is because there are very good engineering centers with a steady flow of engineers from good schools.
That strategy has paid off handsomely for TranSwitch, which last year entered into a strategic alliance with Samsung Electronics Corp. that gives it a preferred status. The alliance holds that if TranSwitch makes the right product with the right level of performance at the right price, Samsung will buy it.
“When you go to our customers in Europe, we can bring talents from the three engineering centers in Europe, and we have almost all native languages covered,” Das says. “And, when a customer sees us doing a lot of development in Europe, they understand that we are very committed to that market. For a small company, it's more an exception than the norm. When we talk to our customers in Japan and China, they know we can fly someone out of Delhi very quickly and help them,” he says.
Yet, because it is not a capital intensive industry, it has had to cut its workforce to reduce its operating costs. Worldwide, TranSwitch peaked at 460 employees in December of 2000. Today, it has 360 worldwide, with 200 of them in Shelton, again according to Lombardo.
In spite of its revenue woes, TranSwitch purchased Bedford, Mass.-based ONEXTM Communications Corp. last September. The company specializes in designing chips for networks, such as telephone systems, in metropolitan areas.
Das points out that, in addition to TranSwitch, he and the other principals started five other companies, one of which is ONEX. They have maintained a minority ownership in these entities, while bringing in outside venture capitalists to fund them as well.
Das says that ONEX had reached the point where more investment was needed in its marketing and sales departments. “So, we had two options. We and the venture capitalists could put more money into marketing and sales in ONEX, or we could ride on the existing marketing and sales arm of TranSwitch. We came to the conclusion that the better strategy would be to use our marketing and sales division. We felt that, even in this down market, it would be better to own the company than duplicate sales and marketing there.”
Das says the down market has given the company one unexpected bonus: some of their customers have begun outsourcing their design work. “While revenue has been adversely affected, our new design activity has catapulted to a new high,” he says. And he says TranSwitch has asked itself, “When the storm is over, what kind of products will our customers need?”
“We're not worried because we have plenty of cash, and our strategy is to make sure that we invest in the right products so that when the market comes back we are in the right position,” Das says.
“You really just can't make blanket statements about manufacturing anymore,” says economist Klepper-Smith. “Today there are many pockets and niches within the manufacturing system.”
In spite of the cost-effectiveness and other advantages of manufacturing overseas, Klepper-Smith emphasizes that Connecticut needs to safeguard its manufacturing sector. “We need to preserve Connecticut's manufacturing base,” he says. “It's manufacturing that begets non-manufacturing, and it has for some time.”
|
Go FirstGo PreviousGo
NextGo LastGo
to Index
|
|
