Mr. Lemaitre: We were founded in 1922, so we have been here for a while. We became a NASDAQ company in 1969. We have always been profitable — which I think, these days, is quite a track record! Although some days it’s a little more difficult than others, we have always been solidly in the black. We have two businesses. One is electrical and safety products for the manufacturing and construction industries. In this business, we manufacture products like electrical cordsets, portable lighting, balancers, etc. This is the business our company was founded on, but today it represents only 30% of our sales. Our other business is connectivity, which includes a family of products for the manufacturing industry at large. These products range from connectors and cordsets used for the control of machines, robots, conveyors, etc. to software and electronic products like communication cards or gateways, which enable different manufacturing networks or different factory control systems to communicate with each other.
TWST: How has that business fared, given the tough manufacturing environment?
Mr. Lemaitre: First, one thing I forgot to say is that we are very international for a company our size. We have manufacturing plants, engineering and sales in many countries in Europe and Asia, including Singapore, China and Japan, and obviously all over North America.
How has the business fared? Not as well as we would like. We’ve retrenched by about 15% in sales in the last couple of years. As you know, the manufacturing environment has been very tough for the last three and a half years. We have had to make a lot of cost reductions, change our structure, and modify our strategy to maintain our results in the black, and we are proud to say that we have been able to do so. We are very dependent on industrial capital investment spending, and when it is down, our sales also go down. In order to survive and even grow in a tough environment, we decided that our planning assumption should be “no economic growth for the next three years.” Hopefully this will be the wrong planning assumption and the economy will pick up. But the question posed to our management team and our people is “how do we profitably grow in a worldwide environment where we see no economic growth for a long time?”
The answer to this question has two parts: One, we decided to invest a lot more in innovation. We believe we can come up with a number of new products, some even outside our historical expertise, to provide a larger and higher value-added portfolio of products to our customers. For the past few months we have worked hard in beefing up our innovative capabilities, and over the next couple years we should, on a regular basis, announce some interesting products to the market.
The second part of the answer was to establish a very stringent set of cost reduction programs to simplify our organization and our manufacturing systems. For example, we have a strategy called “three corners manufacturing” which calls for us to reduce our manufacturing locations within the next two to three years to only three places in the world — China, Mexico and somewhere in Eastern Europe. We also have an active program to reduce our inventory turns. One and a half years ago we were at our industry average of 3.5 turns per year. Today we are at 6.5 turns and want to reach 9 turns by the end of this year; over 12 turns a year later.
So in summary, to grow in a flat economy we are becoming more innovative and efficient in the way we design, manufacture and sell our products.
Tickers included in this excerpt: WDHD
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